Explain why the LDCs are unable to invest much in capital goods and human capital
The demands of the growing populations in these countries force them to devote most of their resources to
the production of consumption goods, and not enough to the production of physical capital goods or human
capital.
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Which of the following would not be considered an automatic stabilizer?
A) rising corporate income tax revenues due to an expanding economy B) increasing food stamp payments due to more people becoming unemployed during a recession C) legislation increasing funding for job retraining passed during a recession D) decreasing unemployment insurance payments due to increased employment during an expansion
Suppose that each worker must use only one shovel to dig a trench, and shovels are useless by themselves. In the long run, the firm will experience
A) increasing returns to scale. B) constant returns to scale. C) decreasing returns to scale. D) The returns to scale cannot be determined from the information provided.
Which is NOT an example of moral hazard
a. people eat less at all-you-can-eat buffets b. loggers clear-cut a tract of land when paying a fixed price rather than when paying per tree felled c. Drivers of heavier, safer cares are more likely to run stop signs d. workers on commission work harder than those paid an hourly wage
The real exchange rate is the exchange rate that:
A. eliminates changes in exchange rates due to differences in inflation. B. would exist if there were no government intervention in the market. C. a person actually pays after the mark-up charged by the bank is included. D. would exist if there were no currency speculation.