Which of the following is true?
a. The United States is rich because it has democratic political institutions.
b. Economic growth is primarily the result of gains from trade, discovery of better ways of doing things, and capital investment.
c. Without foreign aid, poor countries are unable to break the cycle of poverty, low savings and investment, and economic stagnation.
d. Most all countries with an abundance of natural resources have been able to achieve rapid growth and high levels of per capita income.
B
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Suppose that the equilibrium nominal interest rate is 4 percent and the equilibrium quantity of money is $1 trillion. At any interest rate above 4 percent,
A) less than $1 trillion will be demanded and bond prices will fall. B) more than $1 trillion will be supplied and bond prices will fall. C) there is a shortage of money and the interest rate will rise. D) more than $1 trillion will be supplied and the interest rate will rise. E) less than $1 trillion will be demanded and bond prices will increase.
The Paradox of Leverage states that:
a. Excessive leverage is really just an illusion. It occurs when companiesmisestimate the value of their assets and equity. b.When a single firm, in isolation, tries to de-lever its balance sheet, the net effect is often for its leverage to rise. c. Leverage is a puzzle (i.e., a paradox) and always will be. d. When a large portion of the market tries to de-lever its balance sheet, asset prices fall, thereby causing leverage to increase (not decrease). e. None of the above.