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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Explain why population growth can have uncertain effects on economic growth.
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??
During the past year, several large banks extended million in loans to the government and several firms in a developing nation. International investors also purchased million in bonds and million in stocks issued by domestic firms. Of the stocks that foreign investors purchased, million were shares that amounted to less than a percent interest in domestic firms. This was the first year this nation had ever permitted inflows of funds from abroad.
a. Based on the investment category definitions discussed in this chapter, what was the amount of portfolio investment in this nation during the past year?
b. What was the amount of foreign direct investment in this nation during the past year?
Suppose that a foreign resident has bought 20 percent of the shares of a company based in a developing nation but is experiencing difficulty determining whether the firm has responded to this purchase by engaging in risker behaviour. What type of investment has this foreign resident undertaken, and what type of asymmetric information problem is she or he experiencing?
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.
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