MACROECONOMICS (LL)
21st Edition
ISBN: 9781260186949
Author: McConnell
Publisher: MCG
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Question
Chapter 22, Problem 7DQ
To determine
The policies of DVCs to promote economic development.
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- 4. Discuss whether state or market solutions to development problems are preferable by evaluating whether these statements are true or false. Use production function specifications (such as a Solow model with two types of capital) and graphs to prove your points. Give examples in African countries of good and bad policies and outcomes to illustrate your arguments in a through d.a. Markets get the desirable allocation right when all inputs to production are private goods and there is perfect competition.b. It is desirable that the government allow Free Trade rather than kill trade off with punitive taxes and controls.c. State intervention is needed when some inputs to production are public goods (give the definitions explaining how public goods differ from private goods).d. Whether market solutions are preferable to state intervention in a particular case depends on whether private payoffs and social payoffs are aligned.arrow_forwardAssume that a very tiny and very poor DVC has income per capita of $300 and total national income of $3 million. How large is its population? If its population grows by 2 percent in some year while its total income grows by 3 percent, what will be its new income per capita rounded to full dollars? If the population had not grown during the year, what would have been its income per capita?arrow_forward2.a) Provide a definition of ‘technological capability and ‘social capability and describe the differences between them. Why can we say that innovation has a ‘systemic’ nature? 2.b) Financial development, social capital, favorable business regulation, trade openness are different aspects of ‘social capability’ influencing innovation processes and, therefore, economic development. Make a ranking of these factors according to their observed degree of importance for economic development. Explain why ‘inclusiveness’ and ‘equality in opportunities’ can strengthen the innovation capability of an economy. 2.c) Figure 1 below shows the cross-country correlation between the development of the education system and the level of economic development. Analyze Figure 1 by arguing about the importance of the education system for economic development in low, emerging, and developed countriesarrow_forward
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