What implications for the effectiveness of foreign aid would there be if low-income nations have lower marginal products of capital?
A) Foreign aid would probably be more effective.
B) Foreign aid would be preferable to private investment.
C) Foreign aid would suffer the same problems as private investment and possibly be ineffective in increasing productivity.
D) To be effective, foreign aid provided by governments would have to be managed by private concerns.

Question

Quizplus · Accepted Answer

Lower marginal products of capital suggest that the returns on investment are lower in low-income nations. Therefore, foreign aid may suffer the same problems as private investment and possibly be ineffective in increasing productivity. It is important to note that this does not necessarily mean that foreign aid is never effective, but rather that it may not be a solution to all economic problems in low-income nations.

What Implications for the Effectiveness of Foreign Aid Would There