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Why Nations Fail Presentation Actual Exam Questions And Well Elaborated Answers.
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Why Nations Fail Background - correct answer Is an economics book that looks to answer the question why do nations develop differently, with some countries acquiring wealth and power, while others fail. Adam Smith Belief on Economic Growth - correct answer ...

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  • September 14, 2024
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  • 2024/2025
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Why Nations Fail Presentation

Why Nations Fail Background - correct answer Is an economics book that looks to
answer the question why do nations develop differently, with some countries acquiring wealth and
power, while others fail.



Adam Smith Belief on Economic Growth - correct answer His view was simple: an
increase in inputs leads to an increase in output, which ultimately means growth. Remember he was the
first to measure growth not by how much gold you had, but total value of your output. He also believed
that the "invisible hand" would allocate those resources naturally.



Harrod Domar Model on economic growth - correct answer Savings rate and the
capital-output ratio both influence economic growth. Some of the criticisms of this model is that it
assumes

1. an unlimited supply of labor.

1.5- the marginal product of capital is constant.

2. production function has constant returns to scale.



Solow Growth Model - correct answer Builds on Harrod Domar, but states
capital/labor ratios are endogenous and labor is non-abundant. This puts an emphasis on the fact that
long run growth can only be achieved through advances in technology.



What do these models miss? - correct answer The difference between these models
and the argument that Acemoglu and Robinson put forth is that the factors that go into them
(technological advances, capital accumulation) are what growth looks like and how we measure it, not
fundamental causes.



Why Do Institutions Matter? - correct answer Institutions matter because they build
the incentives and provide the framework that are responsible for differences in economic growth
across countries.

, Inclusive Institutions benefits - correct answer These institutions are beneficial
because they encourage investment, industrialization, and the advance of technology. Basically
everything that growth requires.



Extractive Institution Characteristics - correct answer These institutions are
damaging to a country because they are designed to take wealth away from a majority of society and
place it in the hands of a few ruling elite.



Political Institution Examples - correct answer Examples of political institutions is
the form of government (democracy, dictatorship, etc) and it can also refer to political parties



Economic Institutions - correct answer Examples of economic institutions include
the IRS, the U.S. Federal Reserve bank, all banks for that matter.



Geography Hypothesis Acemoglu - correct answer Advocated by Jeffery Sachs and
the intuition behind this is that temperate zones encourage agricultural growth while tropical hot zones
are conducive for damaging diseases and are a determinate for work ethics. This doesn't explain
situations such as the divide between north and south korea or east and west Germany.



Cultural Hypothesis Acemoglu - correct answer Argued by Max Weber who claimed
that cultures, values, and belief are responsible for the development of certain institutional structures.
His examples are that religious movements in the 16, 17, and 18th centuries played key roles in
developing the modern world. Acemoglu's response is that cultures, values, and beliefs are more of a
product of these institutions than a cause.



Ignorance Hypothesis - correct answer Acemoglu contends that this could explain
small failures of countries, but doesn't explain why these problems persist.



Characteristics of spanish colonization - correct answer Spanish colonization was
particularly succesfull because of the abundance of valuable natural resources in south america. The
strategy that the spanish used to colonize south america was to capture the native leaders, establish
themselves as the new group in charge, and then implement systems of taxation and forced labor to
acquire wealth. It is here that we see the birth of extractive institutions whose main goal is to funnel
money to the small elite.

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