Chat with AI
Economics of Macro Issues 7th Edition by Roger LeRoy Miller,Daniel Benjamin
Edition 7ISBN: 978-0134018959Economics of Macro Issues 7th Edition by Roger LeRoy Miller,Daniel Benjamin
Edition 7ISBN: 978-0134018959 Exercise 1
Consider two countries, A and B, and suppose that both have identical physical endowments of, say, iron ore. In country A, however, any profits made from mining the ore are subject to confiscation by the government, while in country B, there is no such risk. How does the risk of expropriation affect the economic endowments of the two nations? In which nation are people likely to be richer?
Explanation
Verified
Verified
Physical endowments of a country are the natural resources available for utilization in a country. Economic endowments refer to the management and development of the resources of a business, community or country. All infrastructures related to the production, distribution, and sale of goods and services are included in this.
In Country B, there is no risk of confiscation of profits from mining whereas in Country A the presence of this risk would discourage people from entering into the mining business. Lesser use of the country's natural resources would lead to a lower employment level, lower income and lower production levels in Country A. So, in spite of having the same physical endowments as its counterpart, Country A's ability to utilize these endowments is considerably lower than Country B which creates a negative impact on its economic endowments.
People are likely to be richer in Country B as compared to Country A.
In Country B, there is no risk of confiscation of profits from mining whereas in Country A the presence of this risk would discourage people from entering into the mining business. Lesser use of the country's natural resources would lead to a lower employment level, lower income and lower production levels in Country A. So, in spite of having the same physical endowments as its counterpart, Country A's ability to utilize these endowments is considerably lower than Country B which creates a negative impact on its economic endowments.
People are likely to be richer in Country B as compared to Country A.
Economics of Macro Issues 7th Edition by Roger LeRoy Miller,Daniel Benjamin
Why don’t you like this exercise?
Other Minimum 8 character and maximum 255 character
Character 255
