In the two-gap model,which of the following gaps,when binding,leads to foreign aid having the largest impact on GNP?

Question

Quizplus · Accepted Answer

The foreign exchange gap represents the difference between a country's imports and exports, and the amount of foreign exchange it requires to meet the gap. If foreign aid is used to bridge this gap, it can help stimulate economic growth by allowing for increased imports of capital goods and raw materials, which can lead to increased production and output. Therefore, binding the foreign exchange gap is likely to have the largest impact on GNP.

In the Two-Gap Model,which of the Following Gaps,when Binding,leads to Foreign