In an experiment where entrepreneurs with high-quality business plans were given large cash grants, if the recipients had chosen to lend the money out at the prevailing market interest rate instead of investing it in their own businesses, this outcome would still serve as strong evidence that they were previously credit-constrained.
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Ch.9 Lenders and borrowers and differences in wealth - The Economy 2.0 Microeconomics @ CORE Econ
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A government program identifies a group of entrepreneurs with high-potential business plans. Half of these entrepreneurs are randomly selected to receive a large, unexpected cash grant. The recipients overwhelmingly use the funds to purchase new equipment and hire more employees for their businesses. What is the most logical conclusion to draw from the recipients' actions?
In an experiment, a group of entrepreneurs with pre-vetted, high-quality business plans were randomly given large cash grants. The recipients used the funds to expand their businesses. A critic suggests this outcome doesn't prove the entrepreneurs were previously unable to get loans; it just shows they were willing to spend 'free money' on their ventures. Which of the following provides the strongest counter-argument to this critic's position?
Interpreting Experimental Evidence on Credit Access
In an experiment where entrepreneurs with high-quality business plans were given large cash grants, if the recipients had chosen to lend the money out at the prevailing market interest rate instead of investing it in their own businesses, this outcome would still serve as strong evidence that they were previously credit-constrained.
Explaining Evidence of Credit Constraints
Imagine a government program identifies entrepreneurs with high-quality business plans and randomly gives a large cash grant to half of them. The goal is to test if these entrepreneurs are 'credit-constrained,' meaning they have profitable investment opportunities but cannot get loans. Which of the following hypothetical outcomes would most effectively CHALLENGE the conclusion that the entrepreneurs were credit-constrained?
Critiquing Experimental Evidence on Entrepreneurship
In an experiment studying credit access, entrepreneurs with high-quality business plans were randomly given large cash grants. Match each potential action taken by the grant recipients with its most likely economic interpretation.
Analyzing Experimental Results on Business Growth
The results of the Nigerian business plan experiment, where entrepreneurs who received cash grants expanded their businesses, imply that a policy of giving cash grants to any entrepreneur, regardless of their business plan's quality, would be an equally effective way to stimulate business growth.