Suppose you are a famous international economic advisor. You have been asked to asses the possibilities for growth in an African country. It is a country abundant in labor and some natural resources. The capital-to-labor ratio is low
It has a free market economy. You have found that this country does not have a very strong and healthy banking system, however the political system is stable and the government does a good job protecting property rights. Assess this country's prospects for growth. Recommend two things that would enhance the country's growth.
The prospects for this country's growth are fairly good. It has a lot of labor and natural resources. Having abundant factors of production can contribute to strong growth. The free market system is also another characteristic that should help enhance economic growth. Entrepreneurs can respond quickly and adopt technological innovations. We know that technological change can increase labor productivity. Also the fact that the government enforces property rights can help the free market to flourish. The political stability of the government is also a good sign. Investors won't be afraid to risk investing in the country. Two things the country could do to increase growth would be to raise the capital-to-labor ratio and develop the financial sector. The country could increase the capital-to-labor ratio by attracting foreign investment, or perhaps giving tax breaks to firms that increase the amount they invest. This is probably one of the most effective ways to increase growth.
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After running a promotional campaign, the owners of a local shoe store decided to decrease the prices for the shoes sold in their store. One can imply that
a. The promotional expenditures made the demand for their shoes more elastic b. The promotional expenditures made the demand for their shoes more inelastic c. The promotional expenditures has no effect on the shoe demand elasticity d. The owners got it wrong. To cover the promotional expenses, they should have raised the prices.
The per capita real GDP in Sri Lanka is likely to be lower than the United States because Sri Lanka's economy is characterized by:
a. a more equitable income distribution system. b. a high population growth. c. a low regard for political freedom. d. a higher level of consumption spending. e. a high budget deficit.
Who guarantees that prices in the foreign exchange market are identical all over the world?
a. Governments. b. Supranational organizations. c. Central banks. d. Tourists. e. Arbitrageurs.
Using the output at which the aggregate expenditure curve intersects the 45-degree line, we can identify
A. A consumption shortfall at the intersection point. B. Full employment to the left of the intersection point if there is a recessionary gap. C. Equilibrium (macro) at the intersection point. D. Dissaving to the right of the intersection point.