. Read William Easterly’s chapter 2, “Aid for Investment.” Referring to evidence from the chapter, answer the following questions. a) “Saving is not enough for the investment needs of a developing country. So if aid agencies or rich countries provide aid, investment will rise and these countries will grow.” Evaluate this claim in light of chapter 2, has aid worked, why or why not? b) How is the Harrod-Domar model different from the Solow model we described in class? What role did Rostow’s ideas play for the provision of foreign aid? c) If we were to use the Solow model, how would more foreign aid affect the model? For this particular question, using a diagram to supplement your answer is appropriate. 2. Read Easterly’s chapter 8, “Tales of Increasing Returns.” a) 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 you illustrate your answers with examples given in the chapter. b) What are “matches”? Describe and illustrate with examples. How do “matches” explain that some countries are a lot richer than others? c) Describe what the chapter means by “traps.” Describe some government policies that could play a role to get out of “traps.” Grading of this assignment will be done based on the following: Identifying the issue(s): Clearly identifying the problem(s), question(s) or issue(s). Providing background for the problem(s), question(s) or issue(s). Analytics: Applying economic concepts to the questions. Developing logical arguments. Drawing substantiated conclusions. Drawing connections between economic concepts and real world applications. Communication and Structural Organization: Language clearly and effectively communicates ideas. Assignment is organized with an introduction, body, discussion, conclusion and reference section, if applicable. Grammar, syntax and appropriate style.