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Chapter 18: Q. 1 (page 412)
A country's real GDP is growing at an annual rate of percent, and the current rate of growth of per capital real GDP is percent per year. What is the population growth rate in this nation?
The population growth in this nation when GDP is per year is
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A developing country has determined that each additional billion of net investment in capital goods adds percentage point to its long-run average annual rate of growth of per capita real GDP.
a. Domestic entrepreneurs recently began to seek official approval to open a range of businesses employing capital resources valued at billion. If the entrepreneurs undertake these investments, by what fraction of a percentage point will the nation's long-run average annual rate of growth of per capita real GDP increase, other things being equal?
b. After weeks of effort trying to complete the first of stages of bureaucratic red tape necessary to obtain authorization to start their businesses, a number of entrepreneurs decide to drop their investment plans completely, and the amount of official investment that actually takes place turns out to be billion. Other things being equal, by what fraction of a percentage point will this decision reduce the nation's long-run average annual rate of growth of per capita real GDP from what it would have been if investment had been billion?
Some international policymakers argue that the world's poor require stronger "nudges, "such as policies that prevent them grow making "bad" choices. How might stronger nudges limit economic freedom and potentially slow economic growth? (What Does reducing the range of people's choices expand or limit their economic freedom??
Discuss the sources of international investment funds for developing nations.
Identify which of the following situations currently faced by international investors are examples of adverse selection and which are examples of moral hazard.
Among the governments of several developing countries that are attempting to issue new bonds this year, it is certain that a few will fail to collect taxes to repay the bonds when they mature. It is difficult, however, for investors considering buying government bonds to predict which governments will experience this problem.
Foreign investors are contemplating purchasing stock in a company that, unknown to them, may have failed to properly establish legal ownership over a crucial capital resource.
. Companies in a less developed nation have already issued bonds to finance the purchase of new capital goods. After receiving the funds from the bond issue, however, the company's managers pay themselves large bonuses instead.
When the government of a developing nation received a bank loan three years ago, it ultimately repaid the loan but had to reschedule its payments after officials misused the funds for unworthy projects. Now the government, which still has many of the same officials, is trying to raise funds by issuing bonds to foreign investors, who must decide whether or not to purchase them.
Consider the estimates that the World Bank has assembled for the following nations:
Rank the nations in order, starting with the one you would expect to have the highest rate of economic growth, other things being equal. Explain your reasoning.
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