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Chapter 18: Q. 1- For Critical Thinking (page 410)

Why does the fact that population growth has ambiguous effects on real GDP growth complicate the Chinese government's efforts to accomplish its growth objective?

Short Answer

Expert verified

Most of China's rapid economic growth is attributed to large-scale capital investment (supported by significant domestic savings and foreign investment) and rapid productivity growth, according to economists.

Step by step solution

01

Introduction.

According to the theory of economic growth, educated human capital can help a country's growth fortunes turn around. A country with a shrinking population appears to be slowing down.

This is not the case, since evidence from the country of SK shows that the amount of income spent on education by the population is a true factor of progress.

02

Chinese Government's efforts to accomplish its growth objective.

Economists believe For the most part, China's rapid economic growth has been fueled by large-scale capital investment (backed by large domestic savings and foreign investment) and rapid productivity growth. Both of these aspects appear to have functioned together.

03

Overall Productivity of nation.

In this sense, if country RU permits individuals from any other country, especially one that is productive, its own economic growth will increase. These individuals will boost the country's total output.

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Most popular questions from this chapter

For each of the following situations, explain which of the policy issues discussed in this chapter relates to the stance the institution has taken.

a. The World Bank offers to make a loan to a company in an impoverished nation at a lower interest rate than the company had been about to agree to pay to borrow the same amount from a group of private banks.

b. The World Bank makes a loan to a company in a developing nation that has not yet received formal approval to operate there, even though the government approval process typically takes 15months.

c. The IMF extends a loan to a developing nation's government, with no preconditions, to enable the government to make already overdue payments on a loan it had previously received from the World Bank.

During the past year, several large banks extended 200million in loans to the government and several firms in a developing nation. International investors also purchased 150million in bonds and 350million in stocks issued by domestic firms. Of the stocks that foreign investors purchased, 100million were shares that amounted to less than a 10percent 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?

Discuss the sources of international investment funds for developing nations.

Suppose that a foreign resident is contemplating buying 5 per cent of the shares of a company based in a developing nation but is experiencing difficulty determining whether the firm is riskier than others in that country. What type of investment is this foreign resident considering, and what type of asymmetric information problem is he or she experiencing?

In terms of the basic arithmetic of economic growth, through what mechanism do improvements in labor and capital productivity help to boost the rate of growth of per capita real GDP?

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