Question #17

Reading: Reading 6 Economic Growth

PDF File: Reading 6 Economic Growth.pdf

Page: 9

Status: Unattempted

Correct Answer: D

Part of Context Group: Q17-18 First in Group
Shared Context
- Which economist is mostly applying neoclassical theory when stating her concerns? A) Economist #3. B) Economist #2. C) Economist #1.
Question
The three countries' willingness to provide financial incentives for innovation is because:
Answer Choices:
A. consideration of private benefits alone would lead to suboptimal investment in R&
B. Increase in innovation would lead to convergence of standard of living
C. increase in innovation is the only way to grow under the endogenous growth theory
Explanation
When private investments in R&D are sub-optimal, financial incentives may restore the level of investment to optimal levels. Under the endogenous growth theory, the growth rate in standard of living can be achieved via technological growth as well as capital deepening. Convergence of standard of living would only be an incentive for developing countries.
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