Answer to Question 1
Institutions are the formal and informal rules governing the organization of society, including its laws and regulations. The institutions hypothesis claims that differences in institutions, that is, the way in which societies have organized themselves and shaped the incentives of individuals and businesses, are at the root of the differences in prosperity across the world.
Answer to Question 2
The prices they pay for goods and services will increase and they will have to make sacrifices in other areas in order to maintain a lifestyle without going deeply into debt.
