N4

In his book The Elusive Quest for Growth, development economist William Easterly discusses the relationship between foreign aid and investment in poor countries, He posits that to establish the effectiveness of aid in promoting investment, two tests should be passed First, there should be a positive statistical association between aid and investment, second, aid should pass into investment 1 for 1. that is, a 1 percent (of GDP) Increase in aid should result in a 1 percent (of GDP) increase in investment. Using a data set of 68 countries from 1965 to 1995, he finds that only 17 of 88 countries pass the first test, and of them, only 6 pass the second Based on the information in the chapter, and perhaps your own reading, explain why foreign ald designed to spur investment usually does not work O A. It spurs the expanse of inclusive economic institutions O B. It promotes political creative destruction O C. It is insufficient to sustain growth. Q D. It Is sufficient to remove the need to increase human capital