Question

a) The developers of the Endogenous Growth model thought that there was at least one significant fault in the Neoclassical Growth model. What was this fault? Draw any appropriate graphs and briefly explain.

(b) How does the Endogenous Growth model fix this fault? Briefly explain.

(c) The developers of the Neoclassical Growth model responded to this criticism by pointing out that they could fix this fault within the Neoclassical Growth model by slightly changing just one of its assumptions. Draw any appropriate graphs and briefly explain.