In the Following Equation,gdp Refers to Gross Domestic Product,and FDI

question 1

Multiple Choice

In the following equation,gdp refers to gross domestic product,and FDI refers to foreign direct investment. log(gdp) = 2.65 + 0.527log(bankcredit) + 0.222FDI
(0) 13) (0.022) (0.017)
Which of the following statements is then true?

• A)If gdp increases by 1%,bank credit increases by 0.527%,the level of FDI remaining constant.
• B)If bank credit increases by 1%,gdp increases by 0.527%,the level of FDI remaining constant.
• C)If gdp increases by 1%,bank credit increases by log(0.527)%,the level of FDI remaining constant.
• D)If bank credit increases by 1%,gdp increases by log(0.527)%,the level of FDI remaining constant.

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Definitions:

Returns to Scale

A concept in economics that describes how the output of a firm changes as all its inputs are increased proportionally.

Short Run

A period in economics during which at least one factor of production is fixed, limiting the adjustment processes of the economy.

Production Function

A mathematical representation of the relationship between inputs used in production and the output generated.

Returns to Scale

The rate at which output increases as inputs are proportionally increased in the production process.