Impact of Innovation and FDI on Economic Growth

Very Hard Economic Growth And Development Growth Theories

Consider a developing economy that has recently implemented various policies to promote technological innovation and foreign direct investment (FDI). According to various growth theories, which one of the following statements MOST accurately describes the implications of such policies on long-term economic growth?

Both technological innovation and FDI will lead to permanent increases in the economy's productivity and growth due to endogenous growth effects.

The impact of technological innovation will outweigh that of FDI, leading to sustained growth predominantly through human capital development.

While FDI may provide short-term capital inflows, its effects are generally transient compared to the sustainable growth stemming from technological advancements.

Hint

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