Question

Consider three countries: Jovenia (average age: 25), Mittelaltistan (average age: 45), and Decrepetia (average age: 75)....

Consider three countries: Jovenia (average age: 25), Mittelaltistan (average age: 45), and Decrepetia (average age: 75). Based on the lifecycle theory, which of these countries will probably have High savings rates?

Jovenia

Mittelaltistan

Decrepetia

All of the above

Which of the following activities generates the greatest potential for free riding?

activities to increase technological knowledge

activities to increase human capital

activities to increase physical capital

None of these responses has the potential to generate free-riding problems.

A cause of the financial crisis in 2007 2008 was high inflation.

True

False

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Answer #1

Question 1

According to the life-cycle theory, income level works in inverted U manner. At younger age, the income levels are low. In middle age, income level are high and at old age, income levels once again becomes low.

At higher income levels, savings rates are high.

Average age in Mittelatistan is 45 years.

So, Mittelatistan is a middle-aged country.

Thus, Mittelatistan will probably have higher savings rate.

Hence, the correct answer is the option (2) [Mittelatistan].

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