Suppose you are a highly regarded international economic advisor. You have been asked to assess the possibilities of growth in an African country. It is a country abundant in labour and some natural resources. The capital to labour ratio is low. It has a free market economy. You have found that this country does not have a very strong and healthy banking system; however, the political system is stable and the government does a good job protecting property rights. Assess this country’s prospects for growth. Recommend two things that would enhance the country’s growth.

Which of the following statements are correct? state which ones are definitely incorrect and why.   a. Capital grows when investment is higher than depreciation b. The growth rate of capital increases when investment is higher than depreciation c. For a given rate of depreciation of capital, a rise in the ratio of investment to capital will raise the growth rate of capital d. There are no rich countries wth low investment ratios, and no poor countries with high investment ratios e. A country can only invest more than it saves if it borrows from abroad. f. The scatter diagram of capital output ratios vs investment rates does not show a perfect correlation. Therefore there is something wrong with the model of the way capital grows g. A country that increases its saving rate will be able to have more rapid growth of capital for as long as it maintains this higher savig rate h. A country that increases its saving rate will be able to have more rapid…

Discuss why financial markets are important to a healthy economy and how they contribute to economic growth.

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