Reference no: EM131217809

Question 1.) Whether an economy is rich or poor, both types of economies should optimize or maximize the use of its available capital rather than seeking to mobilize new capital resources. Do your agree with this statement? Answer yes or no then justify your answer by using

i.) the presence of a decreasing or diminishing utilization of capital into production; i.e. MPk that is decreasing or already negative

ii.) citing the experiences into economic development of resource poor economies with little economic surplus(savings) for funding acquisition of capital

iii.) there are 4 different types of capital and the economy must use that type of capital available

Question 2.) Consider that the marginal product of capital(MPk) is diminishing or negative in an aggregate production function. What economic phenomena can be used to explain what is happening to the incremental contribution of capital into production in this economy? Can you consider that the capital in this economy is being wasted or misused ? Answer yes or no but justify your answer. Can you consider that the capital in this economy is being under utilized or misallocated? Answer yes or no but justify your answer.

Question 3.) Consider a production function Q = WO where Q is aggregate output(or GDP, GNP), K is capital used into production and L is labor likewise used into production. In this economy, the marginal product of capital needs to be maximized. Do you agree that to maximized the value of marginal productivity of capital there is a need to develop or use necessary [complementary] labor resources? Answer yes or no but justify your answer.

Question 4.) What is the phenomena of crowding out? What is (are) the implication(s) of this phenomena to mobilizing and encouraging private sector investment? What istare) the implication(s) of this same phenomena to a government; specially a government starve of funds to finance on its own needed investments in the economy?

Question 5.) What is the phenomena of crowding in? What is (are) the implication(s) of this phenomena to mobilizing and encouraging private sector investment? What is(are) the implication(s) of this same phenomena to a government; specially a government starve of funds to finance on its own needed investments in the economy?

Question 6.) Some terms to remember(theory of capital)

Accelerator principle	Accelerator term, a
Autonomous investment spending, 10	Capital resources, K
Cost of borrowing,	Crowding in
Crowding out	Diminishing marginal returns from capital
Financial capital	Fixed capital
Human capital	Interest elasticity of capital,v
Investment function	Investment spending, I
Marginal product of capital, MPk	Natural capital
Opportunity costs	Opportunity losses