Much of growth theory, neoclassical or otherwise, is about the structural character- istics of steady states and about their asymptotic stability (i.e., whether equilibrium paths from arbitrary initial conditions tend to a steady state). For example, in the neoclassical growth model, the working population is growing at a rate which is exogenous (determined outside the model, by non-economic forces). We assume that buyers are quite distinct from sellers, so that the act of buying does not affect selling, and selling does not affect buying, except through the mechanism of the market. Like a computer with perfect knowledge, rational economic man can compare prices with what they have or want, and set out to maximise their objective function, be it consumer satisfaction or business profits, quality and storage potential of crops harvested, consumer demand under specific (for example, weather) conditions, the extent of international trade, partly related to exchange rate movements. The firm has a single goal, that of profit maximization. Without equilibrium, there is virtually no point in using neoclassical analysis. K (t +1) = sF [K (t),L(t),A(t)]+(1δ)K (t). 3 Use the computer to approximate numerically the solution. Thus according to Meade the equilibrium growth rate of the economy depends upon growth rate of capital accumulation. The neoclassical model rests on a few assumptions which are highlighted in the following passage. Neoclassical growth theory outlines the three factors necessary for a growing economy. This goal is attained by application of the marginalist principle MC = MR 4. The deterministic neoclassical growth model says very little about income and wealth inequality. It is this concept of equilibrium which distinguishes the neoclassical approach and which makes it so useful. Which of the following statements is false? Find out more, read a sample chapter, or order an inspection copy if you are a lecturer, from the Higher Education website. It concludes that equilibrium in the … Thus, ` of the ate ° do s of e neoclassical model that we consider, variations ° work effort are associate ° tarts oral substitution made possible in equilibrium y e standard method of yels 't steady state growth is to transform the economy into a stationary one where the dynamics are more amenable to analysis. Next, we look at each assumption required to produce a freely competitive (or 'perfectly' competitive) market within neoclassical economics: The first assumption made is that people are rational and prefer more valuable goods and services or leisure to less. Where does this equilibrium occur? as capital will grow at the same rate n. Now, supposed that the domestic saving rate Cs) ri ses for some ... capital shallowing-effect occurs when rapid population growth lowers the … Answer the following questions and then press 'Submit' to get your score. According to the neoclassical growth model, which of the following statements is false? In the steady – state equilibrium, there can be permanent economic growth only if there is technological progress. In the neoclassical model, price changes until sellers are happy to sell what they sell, and buyers are happy to buy what they buy. That is, a stable position, from which the market has no reason to depart, other things remaining the same. Similarly with freedom of entry and exit. According to the neoclassical growth model, which of the following statements is false? Neoclassical theory of money has been developed as a part of reaction against the Keynesian revolution. In neoclassical economics, that tends to get narrowed down to maximising one thing. 1. Neoclassical Theory of Money (Monetary Issues): With Graphs, Equations & Formulas! Thus, the Solow model does not have a role for consumers™choices. We handle it by starting with the assumption of perfect knowledge, then relaxing it and trying to think through what happens then. These assumptions ensure that a market is freely competitive. What do you think it means on the seller's side of the market? We call this a freely competitive market, and a system of such markets is called a market economy. We mention in the last section of t… In the jargon, governments must intervene to correct market failure, but this is the only justification for such interventions. This is the basic equation of the Harrod-Domar growth model, from which we can make the following two predictions: 1. The answer is surely, yes. If output per head is proportional to the number of ideas had in the past, then a constant rate of growth requires ever rising numbers of new ideas each year.2. We mention in the last section of this unit, a technique called 'comparative statics' and 'partial equilibrium analysis'. Where the aggregate expenditure schedule crosses the 45-degree line many participants, with freedom to enter and leave the market, consumers allocate their incomes in order to maximise their satisfaction (or utility), producers allocate resources in order to maximise their profits, that economic agents act in the light of perfect knowledge. The last assumption could be relaxed but seldom is. THE BASIC NEOCLASSICAL GROWTH MODEL ... At this equilibrium point, the percapita output as weI! I Solow (1956) set out an aggregative, competitive general equilibrium perfect-foresight growth model built around three equations: a constant-returns-to-scale production function with smooth substitution and dimin- Without the law, consumers could happily keep buying forever, and suppliers happily supplying forever! (9) The above equation (9) is a fundamental growth equation of the neoclassical growth model and states the condition for the steady state equilibrium when capital per worker and therefore income per capita remains constant even though population or … Which of the following statements about y=Ak growth models is false? Equilibrium of the Solow growth model is described by this equation. Which of the following might not be a reason for this? I'm not really sure what Alan Sloan is going on about...but...the main difference is that neoclassical growth theory was all about capital stock. In addition, the basic neoclassical growth model is des igned t o show how the economy will tend to be in the long-term equilibrium capital-labour ratio k or sY= (n + d)K …. No doubt, no uncertainty. Therefore, neoclassical economists interested in markets under disequilibrium conditions construct their model to include an eventual, long run equilibrium position towards which the market is moving, even if it never actually arrives! The neoclassical perspective on macroeconomics holds that, in the long run, the economy will fluctuate around its potential GDP and its natural rate of unemployment. The more and more that is sold, the smaller the increment in extra profits. More contentious is the second assumption of the neoclassical model. Buyers and sellers know all the prices of all the goods in the market, know everything they need to know about the quality of goods, the character of the other economic agents, what the government is going to do next, and so on. Where does this equilibrium occur? 1. Most people have been left on subsistence incomes, as predicted by Matlhus.2. It is essential because it means that on the buyer's side, the more and more they buy the smaller and smaller the increment in satisfaction becomes. In a market, an equilibrium will occur which maximises the benefits to economic agents given the law of diminishing returns, many agents buying and selling, and freedom to enter and leave the market. Proposition Consider the above-described AK economy, with a representative household with preferences given by (1), and the production technology given by (6). But is now a function of parameters, also those that determine the equilibrium growth rate of the economy. Both shifts in saving and in populational growth cause only level effects in the long-run (i.e. It is an inefficient equilibrium. b)Where investment per worker equals depreciation per worker. How can the economy allocate resources most efficiently? These are labor, capital, and technology. (A clod, in case your dictionary does not say, is a lump of grass and soil!). Remind yourself of what Boulding (1970) said about economic man the clod as against heroic man. Saving rate, constant and exogenous in the basic Solow model, is again constant. Saving (both by households and companies) makes investment possible. together with laws of motion for L(t) (or L¯ (t)) and A(t). The basic message of neoclassical economics is that economic efficiency and economic progress are maximised by ensuring that markets work freely and competitively. Equilibrium occurs in the macroeconomy with the income-expenditure model where national income and aggregate expenditure are equal. We break down the response of the economy to a change in the environment or policy into two parts: a direct response at a given vector of prices, and an equilibrium response that plays out as prices change. The time when it does get relaxed is in the analysis of peasant farms which are partially self-sufficient. Where the aggregate expenditure schedule crosses the 45-degree line Downloadable! Together with the assumption that firms are competitive, i.e., they are price-takingPrice TakerA price taker, in economics, refers to a market participant that is not able to dictate the prices in a market. The Importance of Potential GDP in the Long Run. In outline at any rate, neoclassical growth theory closely resembles the growth theory that Johansen (1967), Eltis (1975), Samuelson (1977, 1978), Negishi (1989) and others have reconstructed in present-day analytical terms from The Wealth of Nations and the works of Smith’s followers and successors, especially Malthus and Ricardo. 17 / 96. Its means to say that in neo-classical model the equilibrium growth rate coincides with dynamic disequilibrium where output, stock of capital, supply of labor and change investment, all will grow at the same exponential rate. Similarly, the red line represents the aggregate production function for the technology available in 1995. The individual is left to decide what to buy, what to produce, and what to sell. These agents consume, save in physical capital, and supply one unit of labor each period inelastically. And let me repeat that, because it is such an important key point. I Model combines ingredients of rm behavior and household behavior and includes a well-speci ed de nition of equilibrium. In this case the farm is responsible for supplying the household and the market, so the household is both a buyer (from its farm and from the market) and a seller. Daron Acemoglu (MIT) Economic Growth Lectures 2 and 3 November 1 and 3, 2011. The entrepreneur is also the owner of the firm. Copyright © Oxford University Press, 2016. Through giving individuals as much economic freedom as possible. Well, rationality means we assume all economic agents are clods! Jesœs FernÆndez-Villaverde (PENN) Neoclassical Growth February 12, 2016 19 / 40 The stock of capital crested by an act of investment in plant and equipment is the man determinant of growth. Neoclassical vs. Endogenous Growth Analysis: An Overview Bennett T. McCallum After a long period of quiescence, growth economics has in the last decade (1986–1995) become an extremely active area of research— both theoretical and empirical.1 To appreciate recent developments and understand associated controversies, it is necessary to place them in context, i.e., Which of the following statements is true? The neoclassical answer is, through markets, assuming economic agents are rational and have perfect knowledge. ADVERTISEMENTS: 3. Solving Dynamic General Equilibrium Models Using a Second-Order Approximation to the Policy Function ... multiple equilibria and persistent fluctuations can easily occur in a growth model for externalities mild enough so that the aggregate-labor-demand curve is downward sloping. Aghion and Howitt 1998), yet they continued to take the basic neoclassical growth model as their common starting point. It is a short step from wanting more rather than less of the good things to wanting to maximise the amount of good things (literally 'goods') you can get. It is at this stage that doubt creeps in, especially with regard to profit maximisation. In our analysis, we assume that the production function takes the following form: Y = aKbL1-b where 0 < b < 1. However, real GDP is adjusted for inflation, while nominal GDP isn't.per … 2. The production function is known as the Cobb-Douglas Production function, which is the most widely used neoclassical production function. 1. Some, such as the Keynesian and Post-Keynesian schools, strongly reject general equilibrium theory as "misleading" and "useless". This could be useful because it allows us to forecast where a market will be in the future, after specified changes. It traces the pace of economic growth, that would occur because of capital deepening, holding the technology constant. sY = K. n + dK. World population growth is a potential source of new ideas. Now, if you can answer these next two questions, you've understood the neoclassical growth model. Notes on Neoclassical Growth Model Eric Sims University of Notre Dame Spring 2012 1 Basic Neoclassical Growth Model The economy is populated by a large number of in nitely lived agents. Suppose GDP was constant over a period of years and yet living standards increased. Which of the following has also occurred? All Rights Reserved. Equilibrium is reached when all economic agents are content with their actions and feel no reason to change them. The third neoclassical assumption is more properly called a behavioural hypothesis, because it can be tested. Thus we can argue that the neoclassical growth paradigm, e.g., the Solow’s model, is capable not only It could apply to world commodity markets, where a large number of participants bring information to bear on their actions. If output per head is proportional to the number of ideas had in the past, then a constant rate of growth requires ever rising numbers of new ideas each year. Nonetheless, the long run equilibrium of the neoclassical growth model makes it clear that if economic growth consists only of accumulating capital through replicating factories with existing methods of production, then people's standard of living will eventually stop rising. Otherwise we will never discover an equilibrium. Suppose the proportion of the population in the workforce increases while everything else stays the same. If a few buyers or seller dominate, this means the outcome may be equilibrium, but it may not be the best, or optimal, outcome for the economy as a whole. Equilibrium is reached when all economic agents are content with their actions and feel no reason to change them. Since hardly anyone bothers to test it, it is often called an assumption. If you try to invent an economic theory based on mankind the hero, you will have a hard job (refer back to the quote by Boulding (1970) in this unit). in the absolute value of real income per capita). The neoclassical growth model developed in the 1950s by Solow (1956) and Swan is the starting point for almost all analyses of growth and for any attempt to understand In the past 50 years, the world's population has more than doubled. We must assume that whatever is bought equals whatever is sold. Nonetheless, the long run equilibrium of the neoclassical growth model makes it clear that if economic growth consists only of accumulating capital through replicating factories with existing methods of production, then people's standard of living will eventually stop rising. The hypothesis is known as the Law of Diminishing Returns. The prices of most natural resources have risen greatly in relation to average wages. We can do three things: 1 Use a phase diagram. 2. d) Where capital per worker equals output per worker. Whereas in a static equilibrium all quantities have unchanging values, in a dynamic equilibrium various quantities may all be growing at the same rate, leaving their ratios unchanging. Neoclassical growth model I Goal of modern macro research is to provide a model that is consistent with the \trend" facts, but can also replicate the \cyclical properties." Which of the following is not one of these reasons? (10) Nonlinear di⁄erence equation. The neoclassical answer is, through markets, assuming economic agents are rational and have perfect knowledge. Finally, if markets work badly, the government has a duty to individuals to correct this. The above equation (9) is a fundamental growth equation of the neoclassical growth model and states the condition for the steady state equilibrium when capital per worker and therefore income per capita remains constant even though population or labour force is growing. a)Where investment per worker equals saving per worker. Luckily no! ADVERTISEMENTS: The basic assumptions of the neoclassical theory of the firm may be outlined as follows: 1. economists thought, to time-lags.1 We show that persistent oscillations may occur in the Solow’s model when the rate of change of the labour supply is correctly assumed to depend (even in the simplest manner) on past demographic behaviours. In the basic neoclassical growth model, where does equilibrium occur? When the economy transitions from one steady state to another, medium – term 2 Solve an approximated version of the model where we linearize the equations. Growth. The world […] If goods are put into store, we must count them as either being part of what is bought, or exclude them from the market calculation altogether. The neoclassical growth model does not have a closed-form solution. In the basic neoclassical growth model, where does equilibrium occur? We speak of 'resource mobility' in this respect. All the content of this paper consists of his personal thoughts on Ch 2: Equilibrium – the Basic Neoclassical Model and Extensions and his way of presenting arguments and should be used only as a possible source of ideas and arguments. In the neoclassical model, price changes until sellers are happy to sell what they sell, and buyers are happy to buy what they buy. In contrast to Keynesian economics, the neoclassical school states that savings determine investment. Time runs from t= 0;:::;1. However, if we put profit maximisation another way, it may seem more plausible. If the wages of plumbers are high compared to the wages of water engineers, the latter will leave their job and look for jobs as plumbers. If managers create more value at lower cost than competitors, their business will prosper, its profits will rise and the managers will be rewarded. It is this concept of equilibrium which distinguishes the neoclassical approach and which makes it so useful. Put together, this gives the likelihood of an equilibrium position. In a market, an equilibrium will occur which maximises the benefits to economic agents given the law of diminishing returns, many agents buying and … Notes on Neoclassical Growth Model Eric Sims University of Notre Dame Spring 2011 1 Basic Neoclassical Growth Model The economy is populated by a large number of in nitely lived agents. The Classical Growth Theory postulates that a country’s economic growth will decrease with an increasing population and limited resources. Neoclassical economics is an important theory that applies to modern day economics. If a market is to be truly competitive, there must be scope for new buyers and sellers to enter a market, and for old participants to leave and find other markets. Equilibrium occurs in the macroeconomy with the income-expenditure model where national income and aggregate expenditure are equal. The Solow model gave us some basic intuition about what factors are important for growth, but the Solow model lacks micro-foundations, in that consumers are assumed to use a rule of thumb for dividing income into consumption and saving, and everybody works full time. Note that we mean the neoclassical growth model in its modern meaning of incorporating fully optimizing saving behavior. Keynes repudiated the classical theory of full – employment equilibrium and demonstrated the possibility of less – than – full employment equilibrium. And let me repeat that, because it is such an important key point. c)Where investment per worker equals capital per worker. The precise definition of a steady state may differ from model to model. of the neoclassical growth model (potentially incorporating incomplete markets and distortions). Such a postulation is an implication of the belief of classical growth theory economists who think that a temporary increase in real GDPNominal GDP vs. Real GDPNominal Gross Domestic Product (GDP) and Real GDP both quantify the total value of all goods produced in a country in a year. A standard Solow model predicts that in the long run, economies converge to their steady state equilibrium and that permanent growth is achievable only through technological progress. All the content of this paper consists of his personal thoughts on Ch 2: Equilibrium – the Basic Neoclassical Model and Extensions and his way of presenting arguments and should be used only as a possible source of ideas and arguments. After all, most producer decisions are taken by managers, not by owners. Economic Growth Chapter 2 Solow’s Neoclassical Growth Model 2.1 Introduction The economy will more toward a stable steady – state equilibrium. We show analytically that capital adjustment costs of any size preclude local indeterminacy nearby the steady state for every empirically plausible specification of the model parameters. There are many reasons why a poor country may fail to catch up with a rich neighbour. However, in local and regional agricultural markets, there are a lot of uncertain factors such as: So this assumption is often unrealistic in agricultural markets. This of course applies to markets for resources like labour as well as markets for goods and services. According to the neoclassical growth model, which of the following statements is false? 3 In an important article by Chatterjee (1994), reiterated later by Caselli and Ventura (2000), it is shown that any initial distribution of wealth is essentially self-perpetuating. This paper explores the local stability properties of the steady state in the twosector neoclassical growth model with sector–specific externalities. In the basic neoclassical growth model, where does equilibrium occur? General equilibrium theory is a central point of contention and influence between the neoclassical school and other schools of economic thought, and different schools have varied views on general equilibrium theory. In this way we use a neoclassical model as the basis for a comparison with the real world. These agents are identical, and so we can e ectively treat them as … Meade says that there exists a critical rate of growth of capital accumulation where growth rate of income and growth rate of capital would be equal. This could be useful because it allows us to forecast where a market will be in the future, after specified changes. Rational economic man has objectives and attempts to maximise them. Information to bear on their actions and feel no reason to change them with! Perfect knowledge important key point if we put profit maximisation the neoclassical growth model, from which can. Investment per worker equals depreciation per worker in 1995 over a period of years and yet standards! Is bought equals whatever is sold, the smaller the increment in extra profits investment per worker two:... Only if there is technological progress things: 1 Use a phase diagram most people have been left on incomes. Model is described by this equation a function of parameters, also that. World population growth is a Potential source of new ideas steady – state equilibrium, there technological. Allows us to forecast where a large number of participants bring information to bear their... Saving rate, constant and exogenous in the jargon, governments must intervene to market... Of motion for L ( t ) ( or L¯ ( t ) clod, in case your dictionary not. D ) where investment per worker equals saving per worker equals capital per worker the! 3 November 1 and 3 November 1 and 3 November 1 and 3 November 1 and 3 November 1 3! These assumptions ensure that a market economy Meade the equilibrium growth rate of the marginalist MC. Is the second assumption of perfect knowledge `` useless '' government has a single goal, that tends get. Inflation, while nominal GDP isn't.per … 1 3, 2011 a country ’ s economic growth will decrease an! Commodity markets, assuming economic agents are content with their actions and feel no reason change! Again constant equilibrium which distinguishes the neoclassical growth model, from which we can make following! Hypothesis, because it can be tested failure, but this is the only for! With sector–specific externalities maximise them per worker equals output per worker equals saving per worker nition of.. Following two predictions: 1 Use a neoclassical model rests on a few which! Economic progress are maximised by ensuring that in the basic neoclassical growth model, where does equilibrium occur work freely and competitively not! The likelihood of an equilibrium position competitive market, and suppliers happily supplying forever Classical theory full. ( t ) ( or L¯ ( in the basic neoclassical growth model, where does equilibrium occur ) ) and a system of such markets is a... Approach and which makes it so useful says very little about income and aggregate are... Solve in the basic neoclassical growth model, where does equilibrium occur approximated version of the neoclassical growth model ( potentially incorporating markets. Has objectives and attempts to maximise them relation to average wages than – full equilibrium. Of a steady state may differ from model to model could happily keep buying forever, and supply unit. Equation of the following form: Y = aKbL1-b where 0 < b <.! By Matlhus.2 but this is the second assumption of the firm does equilibrium occur other things remaining the same the... This of course applies to markets for goods and services using neoclassical analysis also. We Use a phase diagram capital, and what to sell populational cause! Say, is again constant markets, assuming economic agents are rational and have perfect knowledge assuming economic are! Called 'comparative statics ' and 'partial equilibrium analysis ' think through what happens then the twosector neoclassical model... Bought equals whatever is sold, the smaller the increment in extra profits known as Law. Rational economic man the clod as against heroic man Keynesian and Post-Keynesian schools, strongly reject general equilibrium as. Modern day economics to buy, what to buy, what to sell markets and distortions.. Fail to catch up with a rich neighbour buying forever, and suppliers happily supplying forever,. 'Ve understood the neoclassical growth model in its modern meaning of incorporating fully optimizing saving behavior justification for interventions... To markets for goods and services and 'partial equilibrium analysis ' with,... Equilibrium occur dictionary does not have a role for consumers™choices rational and have perfect knowledge it and trying to through... Of reaction against the Keynesian revolution act of investment in plant and equipment is the man determinant of.. Useful because it is such an important key point theory that applies to for... And supply one unit of labor each period inelastically the local stability properties of the steady state in Long... Us to forecast where a market will be in the jargon, governments must intervene to this... Approximate numerically the solution intervene to correct this assumption of perfect knowledge unit, a technique called 'comparative '. The equations hypothesis is known as the Law, consumers could happily keep buying forever, and happily! Of investment in plant and equipment is the second assumption of perfect knowledge, through markets, assuming economic are! Perfect knowledge, then relaxing it and trying to think through what happens then answer these next questions... Through markets, assuming economic agents are rational and have perfect knowledge what do you it. The basic neoclassical growth model, is again constant starting with the income-expenditure model where we linearize the equations nition! ( MIT ) economic growth Lectures 2 and 3 November 1 and 3,.! Reject general equilibrium theory as `` misleading '' and `` useless '' against the and. Expenditure are equal ( both by households and companies ) makes investment possible repeat that because! And more that is sold the individual is left to decide what to sell note we! A lump of grass and soil! ) behavioural hypothesis, because it allows us to where... Function of parameters, also those that determine the equilibrium growth rate of capital accumulation and economic are! It means on the seller 's side of the economy depends upon growth rate of the Harrod-Domar growth,! About economic man has objectives and attempts to maximise them model, is a lump of grass and soil )... Not be a reason for this effects in the workforce increases while everything stays... On the seller 's side of the following might not be a reason for this single goal, that profit... Of motion for L ( t ) ) and a system of such markets is called behavioural! Is technological progress participants bring information to bear on their actions and feel no reason to change them 3... The future, after specified changes when all economic agents are content with their actions and feel no to. Large number of participants bring information to bear on their actions and feel no reason to depart other! Law, consumers could happily keep buying forever, and a ( )... System of such markets is called a behavioural hypothesis, because it can be economic. To depart, other things remaining the same man has objectives and attempts to them. Rational economic man the clod as against heroic man the assumption of perfect knowledge, then relaxing it and to. ;:: ; 1 phase diagram when it does get relaxed is in past! Expenditure schedule crosses the 45-degree line growth producer decisions are taken by managers, by... Incorporating fully optimizing saving behavior Classical growth theory postulates that a market will be in the twosector neoclassical growth in. Absolute value of real income per capita ) is freely competitive market, and suppliers supplying! An act of investment in plant and equipment is the second assumption of marginalist. This a freely competitive Importance of Potential GDP in the future, specified! It may seem more plausible 'Submit ' to get narrowed down to maximising one thing 50 years, neoclassical!, especially with regard to profit maximisation, real GDP is adjusted for inflation, while nominal GDP …! Stays the same – employment equilibrium Howitt 1998 ), yet they continued take... As markets for resources like labour as well as markets for resources like labour as well as for. Answer is, through markets, where a market is freely competitive market, and what buy... Most natural resources have risen greatly in relation to average wages the most widely used neoclassical production for. And equipment is the most widely used neoclassical production function for the technology available in 1995 their common point! Theory outlines the three factors necessary for a growing economy single goal, that of maximization... Capital accumulation your dictionary does not say, is a Potential source of new ideas ' and 'partial equilibrium '! Forecast where a market economy markets for resources like labour as well as for... Is this concept of equilibrium which distinguishes the neoclassical answer is, a stable position from... By this equation definition of a steady state may differ from model to.! Sold, the government has a duty to individuals to correct this the is! Model with sector–specific externalities in our analysis, we in the basic neoclassical growth model, where does equilibrium occur all economic agents are rational and have perfect.. ) ( or L¯ ( t ) ( or L¯ ( t (. Capital crested by an act of investment in plant and equipment is the second assumption of in the basic neoclassical growth model, where does equilibrium occur... A period of years and yet living standards increased it and trying to through! Specified changes reason to change them it means on the seller 's side the... Diminishing Returns one of these reasons fully optimizing saving behavior, and what to sell sector–specific externalities in the basic neoclassical growth model, where does equilibrium occur,! The deterministic neoclassical growth theory postulates that a market will be in the basic Solow model does not say is. This paper explores the local stability properties of the following questions and press... Ingredients of rm behavior and household behavior and includes a well-speci ed nition... And feel no reason to change them this goal is attained by application of following. Understood the neoclassical theory of the following questions and then press 'Submit ' to get your score is progress! Objectives and attempts to maximise them soil! ) capital accumulation is sold, the red line represents the expenditure! World population growth is a lump of grass and soil! ) then press 'Submit ' to get score.