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PS4_Ans1 - Q8 In this chapter be careful on the term...

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Assessment 4 1 B 2 A 3 C 4 B 5 D 6 A 7 B 8 A 9 B 10 D Suggested explanations to selected questions: Q5 A) is a correct reason. When it is hard to measure output from the service sector, the GDP calculated may not reflect the true ‘total’ contribution in the service sector. Consequently, there was a ‘apparent’ productivity slowdown. B) is also a correct reason as spending on environmental laws implies an increase in the use of resources in producing the same amount of output. Thus, in an average sense, productivity ‘slows’ down. Q6 e.g. Chemical formulae, once exposed, can be obtained by anyone concurrently (i.e. non-rival). Also, it is quite hard to prevent anyone from assessing this information (i.e. non-excludable). (Remember we’re living in the age of internet.) Q7 This is the implication of the ‘catch-up’ theory.
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Unformatted text preview: Q8 In this chapter, be careful on the term ‘human capital’ (e.g. knowledge), it is NOT the same as ‘physical capital’ (e.g. machinery). Q9 When property rights are not enforced by law and order in a country, it is very hard to protect one’s property. e.g. if you own a small boutique in such a country, lack of property rights might imply that anyone can easily seize the ownership of your boutique. One possible consequence would be the frequent collection of ‘protection money/ fee’ from the police, i.e. corruption would be a serious problem. As a result, would you like to own businesses in such places? Q10 Be noted that this is an application/ connection between Ch. 9 (the financial market model in real interest rate determination) and Ch. 10 (the econ growth model)....
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