Econ 232 midterm questions: the neo-classical growth model emphasizes two determinants of intensive growth (ie. growth in output per person). Write a concise essay in which you explain the operation of the neo-classical growth model and the role played by the two key determinants of growth within the model. The neoclassical growth model is used in a closed economy. The assumptions are that there are diminishing returns, perfect competition, perfect information, no externalities, and no public goods. Firms are said to maximize productivity and individuals maximize utility. Douglas production function shows constant returns to scale. In order to get per capital terms, the whole equation must be divided by l, where q=ak^b. The neo classical growth model is an economic theory that outlines how a steady economic growth rate can be accomplished with the proper amounts of three driving forces: labor, capital and technology.