Foreign investment in developing countries is limited for all of the following reasons except:
A. domestic saving in developing countries is too limited.
B. developing countries try to control the nature of foreign investment in order to obtain greater benefits from it.
C. developing countries lack the infrastructure necessary to attract foreign investment.
D. it is often viewed in developing countries as exploitive.
Answer: A
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Dorothy lives in a city with high air pollution. Pollution is a bad, but she is able to avoid air pollution by wearing a face mask. Her preferences are given by
U(q1,q2 ) = (q1 - P)2q22 where q1 is the amount of time she spends wearing a mask, P is the amount of pollution and q2 is a composite of other goods (p2 = 1 ). Dorothy must decide how much to wear a mask and how much q2 to purchase. The price of masks is pM. Assume q1* > P when answering this question. a. Derive Dorothy's demand for masks, q1*(p1,Y, P) b. How does the quantity of pollution affect the demand for masks? That is, find q1*/P. c. How does her income influence the quantity of masks she purchases? That is, find q1*/Y. d. What condition must hold for the assumption q1* > P to hold?
Assuming consumption and leisure are both normal goods, hours worked will fall when the wage increases if
A. if the income and substitution effect move in the opposite direction (i.e., if they are of the opposite sign). B. the income effect dominates the substitution effect. C. if the income and substitution effect move in the same direction (i.e., if they are of the same sign). D. the wage increase is accompanied by an increase in prices. E. the substitution effect dominates the income effect.
During a period of rapid economic expansion an economy might experience
A. increased transfer payments. B. reduced tax revenues. C. demand-pull inflation. D. low levels of employment.
Government spending is a variable that is exogenous to the AS/AD model.
Answer the following statement true (T) or false (F)