A country’s economic growth is a topic on which there are many theories. For example, the classical model of economic growth claims that an economy will grow as long as its saving rate increases; however, this theory has been challenged by more recent models such as the Keynesian and neoclassical approaches.
In this blog post, we explore some of these theories and how they can be applied to real world examples. Content: – The classical growth model states that an economy will only grow if the country’s savings rate increases. However, this theory has been challenged by more recent models such as the Keynesian and neoclassical approaches which claim that economic growth is a function of aggregate demand or supply respectively.
In other words, these theories argue that it is not saving rates but rather government spending (Keynes) or productivity levels (neoclassical approach) on which economies depend for their growth. Â This blog post explores some of these theories in depth! Â – For example, Japan faced a recession after its asset bubble burst in 1990 because high private sector debt caused Japanese companies to cut investment drastically during this period.
