It is argued that import substitution is a misguided trade policy if the intent is to promote long-term economic growth. Explain the reasons underlying this argument
What will be an ideal response?
Import substitution promotes that economic activity in which the country is relatively inefficient. This lowers the real income at any given time and decreases the resources which can be used for investment purposes, hence lower growth rates. An additional answer is that import substitution by creating a protected domestic market fails to provide incentives to produce high, or world-class quality-which means this country, cannot market in foreign countries. With such a (perceived) limited market, endogenous economic growth will not be forthcoming. Finally, it may be that exposure to world competition has its own dynamic effect promoting economic growth.
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The LM curve slopes upward because
a. as income rises, savings rise, increasing output. b. as interest rates rise, the money supply rises, increasing output. c. as interest rates rise, planned investment must fall, increasing output. d. as income increases, money demand rises, which increases interest rates. e. none of the above.
Under communism, _____________ owns and operates most of the means of production and distribution.
Fill in the blank(s) with the appropriate word(s).