Question

1.  What is the primary problem with increasing investment to generate economic growth?

A.  It reduces current consumption, which some economies cannot afford.

B.  It can cause an economy to grow too quickly.

C.  The impact of increased investment on economic growth is minimal.

D.  There is no problem with increasing investment.

2.  Erin spent four years going to college.  Joe spent four years getting experience working at a construction site.  Which represents an increase in human capital?

A.  Erin increased human capital, Joe did not

B.  Joe increased human capital, Erin did not

C.  Both Erin and Joe increased human capital

D.  Neither Erin nor Joe increased human capital

3.  Currently, Denmark’s GDP per capita is $60,000 and Spain’s GDP per capita is $30,000.  Suppose that over the next 10 years, both countries experience equal increases in GDP per capita.  Based on this information, which country likely made a greater investment in capital?

A.  Denmark                         B.  Spain                                  C.  They made equal contributions

4.  I build a factory in Colombia.  I bring in managers from the US to run the business and I hire mostly Colombian workers.  This is an example of:

A.  Foreign Employment Investment                        

B.  Foreign Development Investment

C.  Foreign Direct Investment                                        

D.  Foreign Portfolio Investment

5.  If you develop a better technique for stitching fabric together, this represents an increase in:

A. Physical Capital                                               B.  Human Capital

C. Natural Resources                                          D.  Technology  

Answer 1

1) There is no problem with increasing investment.
The increasing level of investment will not create any problem in the economy. The rate of increase in investment will raise the level of production and the national output in the economy. The fall in interest rate considered as one of the most important reason behind the rise in investment. The increasing investment will takes place through the low cost of borrowing. The increasing investment will increase the employment opportunities and level of production in the economy. Thus the rising population will be employed with the increasing investment in the economy. The economy will move towards a moderate form of development. The increasing investment will not affect a fall in the consumption level. The future consumption will increased with this higher level of investment. The economy will moved to a gradual process of growth through the increasing level of investment.
2) Both Erin and Joe increased human capital.
Erin attains more skilled and trained form of human capital by going to the collage. So Eric will come under the group of skilled person or workers. On the other hand, Joe regains more experience in the labour market. Both will increase human capital in the market. Joe has more working capacity to do physical activities than Erin. Erin can only do the office works and non physical works. But Joe can do more physical and hard works with respect to his experience and productivity.
3) Spain. Here Spain’s GDP rate was half of the Denmark in 10 years before. With huge capital investment Spain increase their level of production and attain higher level of growth. There was a 50 percent rise in the overall production in Spain. But Denmark remains the same level of production with existing investment. Thus Spain increase their participation in international market and tried to increase the level of FDI and this make the growth rate into a very high level.  
4) Foreign Development Investment. Here the company in Colombia spread their business in US and hire the workers from home country only. The managers will determine the adoption of production technologies. These were determined by the workers from US. Thus there is a development investment from US. Foreign Employment investment shows the allocation and selection of workers from different countries. Foreign Direct investment shows the high level of foreign dealings with the financial market in the home country. The Portfolio investment shows the level of distribution of foreign investments in different countries.
5) Technology. The new technique in the fabric production shows the innovation and introduction of a new technology. This new technology will increase the production and distribution of the fabrics across the world. Increasing human capital will generate employment but it will not increase the level of overall production. Physical capital also comes under the machines sections, but it will increase the overall production at its existing level of equipments.