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Chapter 18: Q.2- Critical Thinking Questions (page 409)

How might Africa's productivity improvements help to explain the recent growth reversal between advanced nations and developing and emerging countries?

Short Answer

Expert verified

Reason for Africa's development are High crude fertility rates; high birth rates; childbearing at a young age; low contraceptive use in most African countries; drop in infant death rates are all associated variables.

Step by step solution

01

Introduction.

An emerging market economy is one that is transitioning from a low-income, less developed, frequently pre-industrial economy to a modern, industrialized base with a higher standard of living.

02

Reason for the Growth of Africa's productivity. 

People who live in shantytowns live a transitory existence because they can be evicted at any time. This has been the situation for the majority of shantytown residents. The issue is related to property rights.

03

Factors of Africa's Economic Growth. 

Domestic investment, net ODA flows, education, government performance, urban population, and metal prices all have a positive and significant impact on Africa's economic growth, according to our findings.

04

Ownership titles. 

Residents in this area do not have legal ownership of any existing structures. Granting ownership titles establishes private property rights, making legal action against trespassers simple.

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Most popular questions from this chapter

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??

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 IMF extends a long-term loan to a nation's government to help it maintain publicly supported production of goods and services that the government otherwise would have turned over to private companies.

b. The World Bank makes a loan to companies in an impoverished nation in which government officials typically demand bribes equal to 50percent of companies' profits before allowing them to engage in any new investment projects.

c. The IMF offers to make a loan to banks in a country in which the government's rulers commonly require banks to extend credit to finance high-risk investment projects headed by the rulers' friends and relatives.

Suppose that every 500 billion of dead capital reduces the average rate of growth in worldwide per capita real GDP by 0.1 percentage point. If there is 10 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?

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.

Identify which of the following situations currently faced by international investors are examples of adverse selection and which are examples of moral hazard.

aAmong 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.

bForeign 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.

c. 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.

dWhen 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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