Two Reasons Why Capital May Not Flow to Poor Countries

question 84

Multiple Choice

Two reasons why capital may not flow to poor countries are that the poorer countries may:

• A) have economies unlike those described by a Cobb-Douglas production function and not be subject to diminishing returns to capital.
• B) have already accumulated high levels of capital relative to labor and may already have access to advanced technologies.
• C) legally prevent the inflow of foreign capital and provide strong legal protection of private property.
• D) have inferior production capabilities and not enforce property rights.

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