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Explain the state intervention approaches for promoting development.
State intervention can result within:
• Large bureaucracies staffed through friends and relatives of the ruling elite
• State rules and regulations which burden business along with paperwork and slow down decision-making. For example, registering a modern business can take a year; importing components requirements a government certificate and promotes a bribe for licence corruption.
• Price rules-regulation distorts prices resulting within a misallocation of resources
• State funding of unsuitable capital projects
• Crowding out private investment like the bulk of accessible domestic savings is assigned by the state
• No profit motive implies no risk taking resulting into minimal product development and innovation.
Accountants prepare income statements typically in terms of historical costs, in terms of the purchase price, rather than in terms of the current price. The reasons given for this
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