Based on Exhibit C, capital deepening as a source of growth was most important for: A. Country
Question:
Based on Exhibit C, capital deepening as a source of growth was most important for:
A. Country A.
B. Country B.
C. Country C.
Transcribed Image Text:
Victor Klymchuk, the chief economist at ECONO Consulting (EC), is reviewing the long- term GDP growth of three countries over the recent decade. Klymchuk is interested in forecasting the long-term change in stock market value for each country. Exhibit C presents current country characteristics and historical information on selected economic variables for the three countries. EXHIBIT C Select Country Factors and Historical Economic Data, 2000-2010 Country Factors Growth in Hours Worked (%) 0.9 Country A High level of savings and investment Highly educated workforce Low tariffs on foreign imports Limited natural resources Country B Developed financial markets Moderate levels of disposable income Significant foreign direct and indirect investments Significant natural resources Country C Politically unstable Limited property rights Poor public education and health Significant natural resources Growth in Labor Growth in Growth in Productivity (%) TFP (%) GDP (%) 2.4 0.6 3.3 -0.3 1.6 0.8 1.3 33 1.8 0.8 -0.3 2.6 Klymchuk instructs an associate economist at EC to assist him in forecasting the change in stock market value for each country. Klymchuk reminds the associate: Statement 1: "Over short time horizons, percentage changes in GDP, the ratio of earnings to GDP, and the price-to-earnings ratio are important factors for describing the relationship between economic growth and stock prices. However, I am inter- ested in a long-term stock market forecast." A client is considering investing in the sovereign debt of Country A and Country B and asks Klymchuk his opinion of each country's credit risk. Klymchuk tells the client: Statement 2: "Over the next 10 years, I forecast higher potential GDP growth for Country A and lower potential GDP growth for Country B. The capital per worker is similar and very high for both countries, but per capita output is greater for Country A." The client tells Klymchuk that Country A will offer 50-year bonds and that he believes the bonds could be a good long-term investment given the higher potential GDP growth. Klymchuk responds to the client by saying: Statement 3: "After the next 10 years, I think the sustainable rate of economic growth for Country A will be affected by a growing share of its population over the age of 65, a declining percentage under age 16, and minimal immigration." The client is surprised to learn that Country C, a wealthy, oil-rich country with significant reserves, is experiencing sluggish economic growth and asks Klymchuk for an explanation. Klymchuk responds by stating: Statement 4: "While countries with access to natural resources are often wealthier, the relationship between resource abundance and economic growth is not clear. My analysis shows that the presence of a dominant natural resource (oil) in Country C is constraining growth. Interestingly, Country A has few natural resources, but is experiencing a strong rate of increase in per capita GDP growth." Klymchuk knows that growth in per capita income cannot be sustained by pure capital deepening. He asks the associate economist to determine how important capital deepening is as a source of economic growth for each country. Klymchuk instructs the associate to use the data provided in Exhibit C. Klymchuk and his associate debate the concept of convergence. The associate economist believes that developing countries, irrespective of their particular characteristics, will eventually equal developed countries in per capita output. Klymchuk responds: Statement 5: "Poor countries will converge to the income levels of the richest countries only if they make appropriate institutional changes."
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 100% (QA)
Answered By
Isaiah Mutinda
As a graduate with Bs in Maths and Computer Science and having worked as a freelance full stack software developer for 3 years running I believe I have what it takes to conformable tutor and mentor a student to a professional developer also.
5.00+
2+ Reviews
10+ Question Solved
Related Book For
Economics For Investment Decision Makers
ISBN: 9781118111963
1st Edition
Authors: Sandeep Singh, Christopher D Piros, Jerald E Pinto
Question Posted:
Students also viewed these Business questions
-
Describe how to prove that ABCD is a parallelogram. D A C B
-
Describe how to prove that ABCD is a parallelogram. D A C B
-
Based on the country factors provided in Exhibit C, the country most likely to be considered a developing country is: A. Country A. B. Country B. C. Country C. Victor Klymchuk, the chief economist at...
-
John and Adam exchange offices in a transaction that qualifies as a like-kind exchange. As part of the transaction, Adam gives John a truck. In addition, Adam agrees to assume a $20,000 liability...
-
What is the speed of a pion if its average lifetime is measured to be 4.40 10-8 s? At rest, its average lifetime is 2.60 10-8s.
-
Why is it so important that cash and cash flow be managed in a business?
-
What is the purpose of timelines in an investigation?
-
Guld's Glass, Inc., has three divisions: Commercial, Nonprofit, and Residential. The segmented income statement for last year revealed the following: 1. How will Guld's Glass, Inc., be affected if...
-
Activity 1 Response: Measure the temperature of the environment (ambient temperature), the human body (both forehead and under the tongue), and two other objects in the room. Record this information...
-
Based on Klymchuks Statement 1, over the requested forecast horizon, the factor that will most likely drive stock market performance is the percentage change in: A. GDP. B. the earnings-to-GDP ratio....
-
Which of the following growth models is most consistent with OLearys Statement 2? A. Classical B. Endogenous C. Neoclassical Hans Schmidt, CFA, is a portfolio manager with a boutique investment firm...
-
A retail clothing firm is evaluating the development of a new range of all-weather coats. These coats contain an internal solar battery to provide heating whenever the garment is worn. The solar...
-
Consider the following information: Rate of Return if State Occurs State of Probability of State Economy of Economy Boom 30 Stock A .20 Stock B Stock C .44 .31 Good .30 .13 .20 .13 Poor .20 .03 -.09...
-
(A)Write SQL joined code to represent about the following figures Table A Table B Table A Table B (B) (1) Create three new users U1,U2 and U3. (2) Give all privileges to U3 (3) Give grand of delete...
-
In 2 0 2 0 , Cinnamon, age 2 1 and a full time student for a degree at State University, is claimed as a dependent on her parents return. During the summer, she earned $ 5 , 6 0 0 from a part - time...
-
ac budget of $560,000. However, the plant manager believes that the budget should not remain fixed for every month but should "flex" or adjust to the volume of work that is produced in the Machining...
-
Define Trial Balance and Explain the errors disclosed and not disclosed by trial balance with the help of suitable examples.
-
Determine the force in member FG and in each of the members located to the right of member FG for the scissor roof truss shown. State whether each member is in tension or compression. 05 kip 3 ft 3...
-
An educational researcher devised a wooden toy assembly project to test learning in 6-year-olds. The time in seconds to assemble the project was noted, and the toy was disassembled out of the childs...
-
What is meant by investment in human capital? Use this concept to explain (a) Wage differentials (b) The long-run rise of real wage rates in the United States.
-
Which industries and occupations have the highest rates of unionization? Which the lowest? Speculate on the reasons for such large differences.
-
How does the economists use of the term rent differ from everyday usage? Explain: Though rent need not be paid by society to make land available, rental payments are very useful in guiding land into...
-
Evaluate the integral by making the given substitution. 1. fcos 3x dx, u=3x 2. (x(4 + x) dx, u=4+x 3. (x x + 1 dx, u = x+1 4. j sin xdx. (1 vx 4 dx, u = x 5. (1 + 2x) dx, u 1+ 2x 6. Je cos 8 dB, u -...
-
How are the pro-social and biological domains related to self-regulation and two points that are relevant to each domain?
-
ABC Corporation, a multinational company, is experiencing challenges in managing its international flow of funds. Analyze the factors contributing to these challenges and propose strategies to...
Study smarter with the SolutionInn App