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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?

Inspiring operators to monitor investment performance (B) Signup and view all the answers

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

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

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

By enlarging the market over space and time (D) Signup and view all the answers

What does an efficient financial system aim at?

Limiting risk and reducing information analysis cost (D) Signup and view all the answers

How does a financial system help in promoting savings?

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

What does financial deepening refer to?

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

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

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

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

Lowering the cost of borrowing (B) Signup and view all the answers

What is one aspect of financial broadening?

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

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