What conclusions would we draw about the impact of foreign aid on economic growth and development if we were to use the Solow model to analyze this question? Please use a diagram to supplement your answer.

Properly read the instructions included in the CTW.docx, you must read the two chapters from the PDF attached below, and answer the questions located within the CTW.docx  The Essay must be three full pages of length

Part I.

Read Chapter 8, “Tales of Increasing Returns.”

Referring to evidence from the chapter, answer the following questions:

1. How is knowledge different from physical capital?

What are the special characteristics of knowledge that make it so useful for growth?

How can knowledge help a country grow?

Make sure to use examples from the chapter to support your answers.

2. Describe what the chapter means by “traps” by the author. Why “traps” do occur in the economy?

What are some government policies that could be used to alleviate the effects of “traps”. Please provided a detailed description of these policies.

Part II.

Read Chapter 2, “Aid for Investment.”

1. Evaluate the following claim: “Savings is not enough for the investment needs of developing countries. As such, if aid agencies and rich countries provide aid to developing countries it will increase their rate of investment and generate economic growth.”

Give some examples of these policies.

Has such a policy worked, why or why not?

2. What conclusions would we draw about the impact of foreign aid on economic growth and development if we were to use the Solow model to analyze this question? Please use a diagram to supplement your answer.

3. How does your answer in Part II, 2. change if knowledge is a part of factors of production? Specifically, how does your aggregate production change, and its implication of foreign aids?

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