E+D Economies - Infrastructure

Question 1

Constrains because

Answer 1

• Poor infrastructure - decrease productivity - LRAS shift in - limiting economic growth
• Poor infrastructure - decrease productivity - increase costs - SRAS shift in - increase prices - less competitive - decrease profit - less corp tax rev - less spending on healthcare - limited development

Question 2

Fix

Answer 2

• Promote FDI
• ^^ do through reducing corporation tax - more profit - more FDI
• ^^ or do through reducing wage costs - lower prices - more profit - more FDI
• > > use FDI to expand and invest in new high tech machinery
• ^^ increase profit - increase corp tax rev - increase infrastructure spending - increase productivity - LRAS shift out - improve eco growth and increase productivity - lower costs - lower prices - more competitive - increase profit - more corp tax rev - increase spending on healthcare - improved development

Question 3

Eval

Answer 3

• Improving infrastructure may not necessarily increase growth or development
• Reduce wage costs - decrease incomes - reduce consumption - decrease AD - decrease real GDP - eco growth limited
• Reduce corporation tax - reduce corp tax rev - reduce government spending - development limited

Question 4

Example

Answer 4

India has poor infrastructure - power outages due to bad electricity grids - delays for firms