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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What types of asymmetric information problems might have existed as a consequence of the control that Myanmar's protected natural monopolies exercised over allocation of investors' funds?
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?
Take a look at Table 18-1. Based on the basic arithmetic of economic growth, what were the average annual rates of real GDP growth since 1990 for those nations experiencing negative rates of annual growth of per capita real GDP?
Last year, million in outstanding bank loans to a developing nation's government were not renewed, and the developing nation's government paid off million in maturing government bonds that had been held by foreign residents. During that year, however, a new group of banks participated in a million loan to help finance a major government construction project in the capital city. Domestic firms also issued million in bonds and million in stocks to foreign investors. All of the stocks issued gave the foreign investors more than percent shares of the domestic firms.
a. What was gross foreign investment in this nation last year?
b. What was net foreign investment in this nation last year?
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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