Question

Question 21 (1 point) Recently, the Chinese government has acknowledged that its GDP growth rate for 2015 will fall to 7%, which is substantially below China's recent annual growth rates, including that for 2014 (Wall Street Journal, March 5, 2015). Over the past several decades, China has invested heavily in capital, increasing its capital stock. However, its economic system provides entrepreneurs little incentive to work to develop new technologies. What is the effect of the Chinese government doubling its spending on support for research and technology? Real GDP per hou worked. YIL PF: 200 250 Capital per hour worked. KL This will result in the production function shifting upward. This will result in a slide down the production function. This will result in a slide up the production function. This will result in the production function shifting downward.

Answer 1

Answer 21 - An improvement in the research and technology leads to shift in the production function. Here, Chinese government is doubling its spending on research and technology so it will lead to upward shift in the production function.

Hence option a)is correct.

Answer 22 - Initially real gdp per capita is initially positively related and then negatively related and also growth of real gdp is initially positively related and then negatively related.

Hence, option a)is correct.

Answer 23 - Factors that explain that low income countries are not catching up with high income countries are -

Low rates saving and investment - As people in low income countries are earning low level of income as compare to high level of income countries which as result save less and investment less in other sources.

Central bank - Low income country's central bank do not have enough to supply in the economy because the people are not saving much in banks so as result development process stops because of less money supply in the economy.

Incentive to make money- Low income countries do not have much opportunities because they stick to one job and earn less pay which reduces their growth as a result country growth.