A country with a relatively low level of real GDP per person is considering adopting two policies to promote economic growth. The first is to decrease barriers to trade. The second is to restrict foreign portfolio investment. Which of these policies do most economists say promote growth?
A)Both the first and the second
B)The first but not the second
C)The second but not the first
D)Neither the first nor the second

Question

Quizplus · Accepted Answer

Decreasing barriers to trade is widely supported by economists as a means to promote economic growth because it allows countries to specialize in the production of goods and services in which they have a comparative advantage, leading to increased efficiency and higher incomes. Restricting foreign portfolio investment, on the other hand, is generally not seen as a growth-promoting policy because it limits the inflow of capital and the opportunities for risk diversification for investors.

A Country with a Relatively Low Level of Real GDP