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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

The great 18th-century economist Adam Smith wrote, “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.” Explain how each of the three conditions Smith describes would promote economic growth.

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To determine

ValidatingAdam Smith’s conditions that promote economic growth.

Explanation

Peace would promote economic growth as it is an indication of respect to property rights. Violence, conflicts, and threats of a revolutionary government reduce the domestic resident’s tendency to save or invest. Also, it lowers incentive for foreign investment in the country.

Easy taxes enable citizens and businesses to retain a greater proportion of their earned income...

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