The Production Function Model Showed That Capital Flows to Poorer

question 38

Multiple Choice

The production function model showed that capital flows to poorer regions, because the marginal product of capital is higher in the poorer regions. Robert Lucas's paper showed that that was NOT true. The reason was that:

• A) investors were forced to abandon higher returns in poorer countries.
• B) it was assumed that production functions were the same in all countries.
• C) it was assumed that production functions were different for rich and poor countries.
• D) rich countries offered higher interest rates.

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Definitions:

Adrenal Androgens

Hormones produced by the adrenal glands that influence sex characteristics and support muscle mass and libido.

Inflammatory Response

The body's defense mechanism against infection or injury, resulting in increased blood flow and white blood cell activity to the affected area.

Polyuria

A condition characterized by the production of abnormally large volumes of dilute urine.

Acidosis

A condition in which there is too much acid in the body fluids, lowering the body's pH below the normal range.