Questions: Economic growth and public policy Suppose Hondamaha, a motorcycle manufacturing firm headquartered in Japan, builds a production plant in Arizona. 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. Increasing taxes on income from savings Providing tax breaks and patents for firms that pursue research and development in health and sciences Protecting property rights and enforcing contracts Imposing restrictions on foreign ownership of domestic capital 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

The answer to the first question is: This is an example of foreign direct investment (FDI) in the United States.

For the policies consistent with the goal of increasing productivity and growth in developing countries, the correct options are:

• Providing tax breaks and patents for firms that pursue research and development in health and sciences: This policy encourages innovation and technological advancement, which can lead to increased productivity and economic growth.

• Protecting property rights and enforcing contracts: Ensuring that property rights are protected and contracts are enforced creates a stable business environment, encouraging investment and economic development.

Explanation for each option:

• Increasing taxes on income from savings: This is generally not consistent with increasing productivity and growth, as it can discourage savings and investment, which are crucial for capital accumulation and economic development.

• Providing tax breaks and patents for firms that pursue research and development in health and sciences: This encourages innovation and investment in critical sectors, leading to technological advancements and improved productivity.

• Protecting property rights and enforcing contracts: This creates a secure environment for businesses to operate, encouraging both domestic and foreign investment, which is essential for economic growth.

• Imposing restrictions on foreign ownership of domestic capital: This can deter foreign investment, which is often a significant source of capital and technology transfer for developing countries, thus potentially hindering growth.

For the possible outcomes of rapid population growth, the correct answer is: All of the above.

Explanation for each option:

• A reduction in human capital per worker: Rapid population growth can lead to a dilution of resources, including education and training, resulting in lower human capital per worker.

• A reduction in capital per worker: With more people entering the workforce, the amount of capital available per worker may decrease if capital accumulation does not keep pace with population growth.

• An increase in technological knowledge: While rapid population growth can strain resources, it can also lead to a larger pool of ideas and innovation, potentially increasing technological knowledge.

• All of the above: Rapid population growth can have diverse effects, including both challenges and opportunities, as outlined in the options above.