An increase in capital will increase real GDP per person
a. more in a poor country than a rich country. The increase in real GDP per person will be larger if the addition to capital is from domestic rather than foreign investment.
b. more in a poor country than a rich country. The increase in real GDP per person will be the same whether the addition to capital is from domestic or foreign investment.
c. less in a poor country than a rich country. The increase in real GDP per person will be larger if the addition to capital is from domestic rather than foreign investment.
d. less in a poor country than a rich country. The increase in real GDP per person will be the same whether the addition to capital is from domestic or foreign investment.
b
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According to the Ricardo-Barro effect, if the government runs a budget deficit of $100 billion, by how much does the amount of equilibrium investment increase or decrease?
What will be an ideal response?
Private entrepreneurs are likely to make better investment decisions than central planners because
A) failure of a government project will reduce the personal wealth of the planners involved in the decision. B) the entrepreneurs can often turn a project's failure into a request for additional funding to rectify the "problem". C) the entrepreneurs seek ever larger budgets, while planners will be more focused on cost reductions and efficiency. D) the entrepreneurs who make mistakes must bear the costs of these mistakes