Growth Theory and Long-Run Behavior of Economy

Topics: Economics, Economic growth, Macroeconomics Pages: 12 (3537 words) Published: June 30, 2013
Growth Theory and Long-Run Behavior of Economy|
Antara Islam|

Institute of Business AdministrationJahangirnagar University|

Essay On
Growth Theory and Long-Run Behavior of Economy

Submitted To:
Dr. ShuddhasattwaRafiq
Course Instructor

Submitted By:
Antara Islam
Class ID: 2795
Batch 21

Date of Submission
11 June, 2013

Institute of Business Administration
Jahangirnagar University
Letter of Transmittal

June 11, 2013
Dr. ShuddhasattwaRafiq
Institute of Business Administration
Jahangirnagar University

Subject: Submission of the essay on Growth Theory and the Long-Run Behavior of Economy.

It is a pleasure of mine to submit the essay on Growth Theory and the Long-Run Behavior of Economy. Theessay highlights how growth theory explains the long-run behavior of economy. This essay is developed to strengthen the fact that growth theory explains the long-run behavior of economy with provided data and models. The essay also discusses Neo-classical growth models and also explains what the term Long-Run refers to. I want to thank you for giving me this wonderful opportunity to work on this essay. It has been an exciting experience and an amazing way to broaden my knowledge. If there is any query regarding the essay, I will be honored to answer them.

Sincerely Yours
Antara Islam (2795)


At first, I would like to thank the Almighty Allah for being able to submit my essay on time. I have my healthiest gratitude towards the Director of our Institute and our course instructor of Macro Economics, Dr. ShuddhasattwaRafiq, Associate Professor, Institute of Business Administration, Jahangirnagar University for his guidance, support and the knowledge he shared with us. I would also like to express my deepest gratitude to all those helped me to prepare this essay and shared their experience with me to make this more effective. It would be very difficult for me to complete this essay without their proper guidance and their support.

Table of Contents
Executive Summary | 5| Introduction:|
1.1: Neoclassical Growth Model| 6|
1.2: Assumptions of Neoclassical Model| 7|
1.3: Representation of the Neoclassical Growth Model| 8|
1.4: Long Run| 9|
Literature Review | 10|
Behavior of Economy Explained Through Neoclassical Growth Theory| 2.1: Economic Growth| 11 |
2.2: The Determinants of Long-run Economic Growth2.3: How Growth Theory Explains Long Run Behavior of the Economy2.4:Mathematical framework2.5: Macro-Production FunctionsImplementation of Growth Theory in the Economy of Developed Countries| 1213131415| Conclusion | 16 |

Reference | 17 |
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Executive Summary

The neo-classical growth model is a type of economic models of long-run economic growth set within the framework of neoclassical economics. The model is also known as Solow-Swan growth model or exogenous growth model. Long-run behavior of an economy can be explained using the neoclassical growth model. This model explains the long-run economic growth by analyzing productivity, population growth, capital accumulation and technological progress of a country. The model exogenously determines the long –run growth of the economy. The model works on the prediction that an economy always converge towards a steady rate of growth, which is dependent on the rate of technological progress and also the rate of labor force growth. The neoclassical growth theory outlines how a steady growth rate can be achieved with three major driving forces. As mentioned before those forces are capital, labor and technology. Those driving forces of the model can be used to explain the long-run behavior of an economy. This essay explains how the long-run behavior of an economy can be explained using the growth theory.


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