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Chapter 18: Q. b- For Critical Thinking (page 401)
Why do you suppose that many observers regard India's agricultural productivity issues related to land use as analogous to the problems arising from dead capital?
Agricultural productivity is calculated by dividing agricultural outputs by agricultural inputs.
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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?
Understand why the existence of dead capital retards economic growth?
Suppose that every billion of dead capital reduces the average rate of growth in worldwide per capita real GDP by percentage point. If there is trillion in dead capital in the world, by how many percentage points does the existence of dead capital reduce average worldwide growth of per capita real GDP?
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.
What does this tell us about a comparison of the average rate of growth of real GDP since 2000 in emerging and developing nations compared with advanced nations?
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