Relationship Between Capital Formation and Economic Development
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Questions and Answers

What are the important sources of technical progress according to the text?

  • Human and physical capital (correct)
  • Risk allocation and investment monitoring
  • Financial system and investments
  • Market efficiency and economic development

What is one of the key factors required for the increase in human and physical capital?

  • Decreased financial system efficiency
  • Higher savings and investment (correct)
  • Reduced market size
  • Lower wages and taxes

How does the financial system help in achieving higher savings and investment?

  • By reducing the need for capital formation
  • By linkages between savers and investors (correct)
  • By decreasing the efficiency of resource allocation
  • By limiting access to funding

What is one of the key functions of a financial system regarding investment performance?

<p>Inspiring operators to monitor investment performance (B)</p> Signup and view all the answers

What does a good financial system achieve in terms of finance availability?

<p>Availability in time, quantity, and favorable terms (A)</p> Signup and view all the answers

How does a financial system contribute to economic development through market enlargement?

<p>By enlarging the market over space and time (D)</p> Signup and view all the answers

What does an efficient financial system aim at?

<p>Limiting risk and reducing information analysis cost (D)</p> Signup and view all the answers

How does a financial system help in promoting savings?

<p>By reducing the cost of borrowing and saving more (A)</p> Signup and view all the answers

What does financial deepening refer to?

<p>Increase in financial assets as a percentage of GDP (C)</p> Signup and view all the answers

How does a financial system help in reducing asymmetric information issues?

<p>By minimizing situations where one party lacks information (A)</p> Signup and view all the answers

What is one of the benefits of a well-functioning financial system?

<p>Lowering the cost of borrowing (B)</p> Signup and view all the answers

What is one aspect of financial broadening?

<p>Building an increasing number and a variety of participants and instruments (A)</p> Signup and view all the answers

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