Calculations Shown

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Chapter 18, pblems 18-2, 18-4, 18-10, and 18-12 Follow these instructions for completing and submitting your assignment: Do all work in Excel. Do not submit Word files or *.pdf files. Submit a single spreadsheet file for this assignment. Do not submit multiple files. Place each problem on a separate spreadsheet tab. Label all inputs and outputs and highlight your final answer. Follow the directions in “Guidelines for Developing Spreadsheets

18-2 18-2. 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? (See page 397.)

18-4 18-4. The annual rate of growth of real GDP in a developing nation is 0.3 percent. Initially, the country’s population was stable from year to year. Recently, however, a significant increase in the nation’s birthrate has raised the annual rate of population growth to 0.5 percent. (See page 397.)

a.  What was the rate of growth of per capita real GDP before the increase in population growth?

b.  If the rate of growth of real GDP remains unchanged, what is the new rate of growth of per capita real GDP following the increase in the birthrate?

18-10 18-10. Last year, \$100 million in outstanding bank loans to a developing nation’s government were not renewed, and the developing nation’s government paid off \$50 million in maturing government bonds that had been held by foreign residents. During that year, however, a new group of banks participated in a \$125 million loan to help finance a major government

construction project in the capital city. Domestic firms also issued \$50 million in bonds and \$75 million in stocks to foreign investors. All of the stocks issued gave the foreign investors more than 10 percent shares of the domestic firms. (See page 403.)

a. What was gross foreign investment in this nation last year?

b. What was net foreign investment in this nation last year?

18-12 18-12. Identify which of the following situations currently faced by the World Bank or the International Monetary Fund are examples of adverse selection and which are examples of moral hazard. (See pages 404–405.)

a. The World Bank has extended loans to the government of a developing country to finance

construction of a canal with a certain future flow of earnings. Now, however, the government

has decided to redirect those funds to build a casino that may or may not generate sufficient profits to allow the government to repay the loan.

b. The IMF is considering extending loans to several nations that failed to fully repay loans they received from the IMF during the past decade but now claim to be better credit risks.

Now the IMF is not sure in advance which of these nations are unlikely to fully repay new loans.

c. The IMF recently extended a loan to a government directed by democratically elected officials that would permit the nation to adjust to an abrupt reduction in private flows of funds from abroad. A coup has just occurred, however, in response to newly discovered corruption within the government’s elected leadership. The new military dictator has announced tentative plans to disburse some of the funds in equal shares to all citizens.

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