1. You should be able to tell whether the following statements are true, false o

Question

1. You should be able to tell whether the following statements are true, false or uncertain and also be able to justify your answer. (i) Empirical evidence shows that countries with better institutions have higher real GDP per capita. Therefore, better institutions lead to higher productivity. (ii) The capital income share has declined in recent decades in major advanced countries. (iii) With competitive firms and the constant return to scale Cobb-Douglas production function, a profit maximizing firm would demand for capital if the amount of labor input decreases

Explanation / Answer

Ans

A TRUE Institutions do matter

B false share of labour and capital has remained constant overtime

C false. Both will be increased or decreased at same time

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