Evaluating a Development Strategy
You are a senior economist reviewing a proposal for a developing nation. A consultant has presented data showing a strong, positive statistical association between the number of commercial bank branches per 10,000 people and the national economic growth rate over the last two decades. The consultant's primary recommendation is for the government to launch a multi-billion dollar program to subsidize the opening of new bank branches nationwide, arguing this will directly cause an increase in economic growth.
Based on your understanding of how to interpret statistical associations in economics, identify the fundamental flaw in the consultant's reasoning and propose two plausible alternative explanations for the observed relationship between the number of bank branches and economic growth.
0
1
Tags
Economics
Economy
Introduction to Macroeconomics Course
Ch.6 The financial sector: Debt, money, and financial markets - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
Social Science
Empirical Science
Science
Analysis in Bloom's Taxonomy
Cognitive Psychology
Psychology
Related
A government advisor observes that countries with a higher percentage of households owning stocks also tend to have a higher average income per person. Based solely on this statistical association, the advisor proposes a policy to boost national prosperity by giving every citizen 100 shares of stock in a national fund. Which statement offers the most accurate and fundamental critique of the advisor's policy reasoning?
Critiquing Economic Policy Reasoning
Analyzing Economic Relationships
Deconstructing the Finance-Growth Nexus
An economist observes that in countries where a larger percentage of households have taken out loans from financial institutions, the average income per person is also higher. Based on this statistical association alone, it is a valid conclusion that government policies encouraging more household borrowing will directly cause an increase in the nation's average income.
An economist observes a strong positive statistical association between the size of a country's financial sector and its average citizen's standard of living. Match each potential explanation for this association with the economic reasoning it represents.
Evaluating Economic Development Policy
Evaluating a Development Strategy
Proposing a Causal Mechanism
An economic analyst studies 50 countries over 20 years and finds a consistent, strong positive statistical association between the number of banks per capita and the average national income. Based only on this finding, which of the following is the most logically sound conclusion the analyst can draw?