603.3 Lesson - malinvestment

Screen: malinvestment

Headline: Malinvestment

Reward: 3

Text: Malinvestment is when the prices of things are not accurate, which leads to money being put into things that are not very productive. This happens because it is hard to predict the future and make good choices about what to do with money.

When the market is not working correctly, it is like trying to use a compass when you are not sure where you are. An example of this is when companies can't pay back their loans and have to borrow more money just to stay alive. This is like being a "zombie" company.

When the government is in charge of these decisions, they might make mistakes because they don't have a good way to tell what is a good investment and what is not. This can lead to things like building a subway without enough trains or building a dam without enough power lines.

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QUIZ

Question: What is the main cause of malinvestment?

Answer: Distorted price signals

Feedback: Correct answer! You're on the right track. When prices are not accurate, it can lead to money being put into things that are not very productive. Good job

Correct: true

Answer: Aliens from outer space

Feedback: Wrong answer! But at least you're thinking outside the box. Maybe the aliens are controlling the price signals from their spaceship... or maybe not. Better luck next time

Correct: false

Answer: A lack of unicorns in the economy

Feedback: Sorry, but unicorns do not have the power to control the economy. Although, it would be pretty cool if they did. Better luck next time.

Correct: false