Consider a poor country with an under-developed economy which could invest trillions into its current capital stock – either moving “up” its current productivity “curve” (PC) or shifting to a new and higher productivity (PC) curve. Which approach is likely best for increasing the
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(Q#4) Consider a poor country with an under-developed economy which could invest
trillions into its current capital stock – either moving “up” its current productivity
“curve” (PC) or shifting to a new and higher productivity (PC) curve. Which
approach is likely best for increasing the country’s living standards (Real
Per Person) through time?
(a) A continuous build-up of the current capital stock with established technology
will achieve more – capital “deepening” with more capital for each worker.
(b) R&D that supports “cutting edge” invention and innovation will propel labor
(Q#8) Until recently, the economy in China has grown steadily due to the deliberate
emphasis on low skill – low wage factory labor methods. However, China’s
economic standard of living is still comparatively low. To achieve a U.S. or
German standard of living what should be done?
a) China should continue to stress low skill labor intensive methods of production
that will fully employ its large labor force
b) China should shift to more advanced and capital intensive methods of produc-
tion that emphasize human and knowledge capital
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