Answer Happy

Part A. A nation’s current annual rate of
growth of per capita real GDP is 3.0 percent, and its annual rate
of population growth is 3.4 percent. What is the nation’s annual
rate of growth of real GDP?
Part B: Assume that each $1 billion in net
capital investment generates 0.3 percentage point of the average
percentage rate of growth of per capita real GDP, given the
nation’s labor resources. Firms have been investing exactly $6
billion in capital goods each year, so the annual average rate of
growth of per capita real GDP has been 1.8 percent. Now a
government that fails to consistently adhere to the rule of law has
come to power, and firms must pay $100 million in bribes to gain
official approval for every $1 billion in investment in capital
goods. In response, companies cut back their total investment
spending to $4 billion per year. If other things are equal and
companies maintain this rate of investment, what will be the
nation’s new average annual rate of growth of per capita real
GDP?