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      Question

      Human capital formation is considered a key determinant

      of long-term economic growth. Consider the following statements: I. Expenditure on education and healthcare is treated as an investment in human capital. II. Human capital formation enhances labour productivity and innovation capacity in an economy. III. Human capital and physical capital are perfect substitutes for each other in the production process. IV. Migration of skilled workers from one region to another can contribute to human capital formation in the receiving region. Which of the above statements are correct?
      A I and II only Correct Answer Incorrect Answer
      B I, II and IV only Correct Answer Incorrect Answer
      C II and III only Correct Answer Incorrect Answer
      D I, III and IV only Correct Answer Incorrect Answer
      E I, II, III and IV Correct Answer Incorrect Answer

      Solution

      Statement I is correct. Education, healthcare, and skill development improve the quality and productivity of human resources and are therefore investments in human capital. Statement II is correct. Human capital formation increases labour productivity, innovation, and economic growth by creating a skilled and efficient workforce. Statement III is incorrect. Human capital and physical capital complement each other rather than acting as perfect substitutes. Statement IV is correct. Skilled migration can enhance productivity and knowledge transfer in the receiving region, contributing to human capital formation. Therefore, Statements I, II and IV are correct.

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