An important foundation of the new growth theory is that

Question

Quizplus · Accepted Answer

The new growth theory emphasizes that technological progress is the key driver of sustained economic growth, and that the incentives for creating new technology play a crucial role. Therefore, choice B is the correct answer. Choice A is incorrect because the growth rate of new knowledge, specifically technological advance, is more important than the growth rate of the physical capital stock. Choice C is incorrect because improvements in labor productivity can be a measure of technological growth, and in fact, often are. Choice D is incorrect because that statement is not supported by the new growth theory, which emphasizes the importance of private incentives in driving technological progress.

An Important Foundation of the New Growth Theory Is That