Question

• If a developing country wanted to increase its level of investment, which of these actions would directly lead to this goal?

A) Strengthen and enforce private property laws.

B) Provide a minimum level of food to all people in the country.

C) Increase taxes to prevent corporations from keeping excess profits.

D) Nationalize all foreign manufacturing facilities in the country.

• In class, we wrote the production function as Y = AF(K,H). This production

function tells us that

A) output depends on institutions A, K, and H and these vary by country

B) output is a function of the technology (A), physical capital stock (K), and local

government (H).

C) output is a function of the technology (A), physical capital stock (K), and human

Capital/Labor (H).

D) None of the answers are correct.

• Why might economist consider banks efficient?

A) Banks profit by paying interest to savers and lending the money out at a higher interest rate

B) Banks coordinate lenders and borrowers in a way that would be wasteful if they did not exist.

C) Banks generally do not undertake in risky transactions unless they have full information.

D) Banks cannot fail

E) A&B

• Private spending on tools, plant, and equipment (ie. capital goods) that are used to produce future output is called

A) consumption.

B) investment.

C) government spending.

D) net exports.

Answer 1

If a developing country wanted to increase its level of investment, which of these actions would directly lead to this goal?

C) Increase taxes to prevent corporations from keeping excess profits.

This is because the profit will help in to generate more surplus which could be used for further investment.

• In class, we wrote the production function as Y = AF(K,H). This production the function tells us that

C) output is a function of the technology (A), physical capital stock (K), and human Capital/Labor (H).

• Why might an economist consider banks efficient?

E) A&B

Both characteristics mentioned in option A and B define banks efficiency in the eyes of economists.

• Private spending on tools, plant, and equipment (ie. capital goods) that are used to produce future output is called

B) investment.

The above is the definition of investment because capital goods are of generating capacity which can be utilised in future.