Real consumption is a function of real disposable income, but the ...

[SO00]

Real consumption is a function of real disposable income, but the simple Keynesian model uses real GDP instead of real disposable income. This is appropriate since
 
  A) we cannot measure either exactly and the purpose of the exercise is theoretical only.
  B) real disposable income tends to move proportionately with real GDP.
  C) real disposable income is a fixed percentage of real GDP.
  D) real GDP is a fixed percentage of real disposable income.

Question 2

Discuss the rationales for foreign financing of investment in developing actions and explain how developing countries benefit from international capital investment.
 
  What will be an ideal response?

[kaykay69]

Answer to Question 1

B

Answer to Question 2

The primary motivation for foreign investment in developing nations is the potential for high rates of return on large amounts of untapped resources. Developing countries benefit from international capital investment because they do not have the internal funds to be able to support projects that will lead to economic growth.

[SO00]

TYSM

[epscape]

Excellent