William Easterly, in the Elusive Quest for Growth, Made Each

question 8

Multiple Choice

William Easterly, in The Elusive Quest for Growth, made each of the following arguments except

• A) growth-promoting strategies inspired by the Solow model have not succeeded in practice.
• B) skilled workers in poor countries should earn more than skilled workers in rich countries.
• C) lowering the cost of contraception in high-fertility countries slows birth rates and raises income per capita.
• D) Debt forgiveness transfers aid resources from responsible to irresponsible governments.
• E) Governments distort markets and create incentives that destroy growth.

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Definitions:

Efficient Frontier

A graph representing the set of portfolios that provides the highest expected return for a defined level of risk or the lowest risk for a given level of expected return.

Capital Market Line

A line that depicts the risk-reward profile of investable assets, showing the rate of return for varying levels of risk, based on the market risk premium and the risk-free rate.

Minimum-Variance Point

The point on a portfolio's efficient frontier at which the portfolio has the lowest level of volatility or risk for its level of expected return.

Zero Correlation

A statistical measure indicating that two variables do not move in tandem and their relationship is completely random.