Weak Government Enforcement of Contracts and Laws Tends to

question 93

Multiple Choice

Weak government enforcement of contracts and laws tends to

• A) increase economic efficiency by minimizing government interference.
• B) stimulate innovation and investment.
• C) discourage economic activity by encouraging private-sector coercion such as blackmail and extortion.
• D) not affect economic activity, as incentives for theft and deception are low.

---

Definitions:

Discounted Payback

The period of time it takes for the cash flows from an investment to equal the initial cost of the investment, accounting for the time value of money.

Rate of Return

The improvement or reduction in the value of an investment within a specified interval, articulated as a percentage of the investment’s first cost.

Cash Inflow

Money coming into a business or project from various sources, including sales, investments, and financing activities.

Profitability Index (PI)

A calculation that determines the relative profitability of an investment, indicating the ratio of payoff to investment amount.