- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics
- Reading 11. Economic Growth and the Investment Decision
- Subject 5. Theories of Growth

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**CFA Practice Question**

Which of the following statement(s) is (are) true with respect to the factors that may have influence on economic growth?

II. Neoclassical growth theory primarily examines the effects of productivity growth on economic growth.

III. Under the neoclassical growth theory, the long run steady state equilibrium is achieved when the growth rates of capital per capita and income per capita are constant.

IV. According to the neoclassical theory of growth, long run economic growth is dependent upon the savings rate of a nation.

I. A higher skilled labor force will result in an increase in both the growth rate in output and the absolute level of economic output.

II. Neoclassical growth theory primarily examines the effects of productivity growth on economic growth.

III. Under the neoclassical growth theory, the long run steady state equilibrium is achieved when the growth rates of capital per capita and income per capita are constant.

IV. According to the neoclassical theory of growth, long run economic growth is dependent upon the savings rate of a nation.

Correct Answer: I and III

IV is incorrect because according to the neoclassical theory of growth, long run economic growth is dependent upon productivity growth and the population growth. The savings rate of a nation will only have an impact on its short term economic growth rate.

II is incorrect because the neoclassical growth theory primarily examines the effects of savings choices on capital growth.

IV is incorrect because according to the neoclassical theory of growth, long run economic growth is dependent upon productivity growth and the population growth. The savings rate of a nation will only have an impact on its short term economic growth rate.

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