What impact do you think the following events will have on long run economic gro
ID: 1217379 • Letter: W
Question
What impact do you think the following events will have on long run economic growth? Explain why. a. The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. b. The dictator of a certain country requires that companies planning to open or expand must pay a large fee to file an application one year prior to plans to build new factories or expand existing ones. c. Suppose that a new government is elected in Tempestia. The new government takes steps toward improving the court system and reducing government corruption. The citizens of Tempestia find these efforts credible and outsiders believe these changes will be effective and long lasting. d. The President of a developing country proposes that his country needs to help domestic firms by imposing trade restrictions. Please label answers a, b, c, d. Thanks!Explanation / Answer
(a) Autocratic distribution of land on basis of nepotism among people who lack the expertise to utilize the land resource will lower agricultural production in long run and so, economic growth will slow down.
(b) Imposition of prior fixed fee in advance will lower potential investor confidence in the country and in the long run, global foreign direct investment will fall, resulting in lower growth.
(c) The measures taken will enhance consumer confidence and investor confidence in the country, therefore both domestic consumption demand and foreign investment will increase, resulting in higher long-run economic growth.
(d) Trade restrictions may help domestic firms in the short-run but will stifle their long-run growth prospects which will result in lower trade volumes and lower long-run economic growth rate.
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