Neoclassical growth theory

Neoclassical growth theory is an economic framework that explains how a country's economy grows over time. It suggests that growth comes from three main factors: capital (like machines and buildings), labor (the workforce), and technology (innovation and improvements). The theory posits that as these factors increase, so does productivity and economic output. However, it also emphasizes the concept of diminishing returns, meaning that simply adding more capital or labor will lead to smaller increases in growth over time. Ultimately, it highlights the importance of technological advancement for sustained long-term economic growth.