Question

5. Economic growth and public policy Suppose Yamahonda, a Japanese-owned motorcycle manufacturer, builds a production plant in Alabama. This is an example of foreign investment in the United States. Which of the following policies are consistent with the goal of increasing productivity and growth in developing countries? Check all that apply Pursuing inward-oriented policies Imposing restrictions on foreign ownership of domestic capital Providing tax breaks and patents for firms that pursue research and development in health and sciences Protecting property rights and enforcing contracts Which of the following are possible outcomes of rapid population growth? A reduction in human capital per worker A reduction in capital per worker An increase in technological knowledge All of the above

Answer 1

- Suppose Yamahonda, a Japanese-owned motorcycle manufacturer, builds a production plant in Alabama. This is an example of foreign direct investment in United States. Foreign direct investment involves investment in production or other facilities by an organization in foreign country. In this case Japanese-owned motorcycle manufacturer-Yamahonda has invested in United States by building a production plant in Alabama.

- Policies that are consistent with the goal of increasing productivity and growth in developing countries are mentioned below:

• Providing tax breaks and patents for firms that pursue research and development in health and sciences.
• Providing property rights and enforcing contracts.

These policies will help to increase productivity and growth in developing countries. When research and development will foster, it will help to develop techniques to boost up productivity. Also, research and development in health will help to provide a healthy workforce to the country & therefore, increase in productivity. Business processes will become easier by providing property rights and enforcing contracts. A country in which businesses can prosper easily, productivity increases & hence contribution towards the growth of the country.

- Correct option is all of the above.

Rapid population growth will lead to

• A reduction in human capital per worker.
• A reduction in capital per worker.
• An increase in technological knowledge.

Rapid population growth will reduce human capital per worker & capital per worker. Human capital means skills, knowledge, competencies that help people to create economic value & capital means factors of production such as machinery or buildings. Both of them promotes economic development, growth & innovation in the country. But as resources are scarce, rapid population growth will lead to a reduction in human capital per worker as well as reduction in capital per worker. But rapid population growth will ensure an increase in technological knowledge because advancement in technology will help the nation to serve the large-scale population. Technological advances will help to boost productivity i.e., more output can be produced with available inputs & growing demands of the growing population can be met. Also, technological advancement will contribute towards the growth & development of the country.