CHAPTER 21
1.1 Answers will vary, but most students will most likely agree with this assessment. This seems to
1.2 The information gathered by students will vary, but the following information gives some basic
reasons for the discrepancies. The high GNI per capita for Equatorial Guinea is due primarily to
2.1 Answers will vary but should include the direct costs of health care, the loss of workforce,
2.2 Answers will vary. There is no “right answer” to this problem, only trade-offs. Capital
2.3 The World Bank’s Multilateral Debt Relief Initiative (MDRI) called for 100 percent cancellation
Country Debt Relief (SDR, millions)Debt Relief (US$, millions)
Benin 18 26.59
Bolivia 30 44.32
303
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Solutions to Problems 304
Country Debt Relief (SDR, millions)Debt Relief (US$, millions)
Information in table is from www.worldbank.org. Debt relief is listed in SDR, Special Drawing
The expected benefits are numerous, some of which are detailed in the following statement by
2.4 Many recent famines have resulted from government policies. In some cases, keeping farm prices
2.5 Crowdfunding takes many different forms, with some companies and entrepreneurs offering a
stake in the company or interest payments for funds received, but a large amount of crowdfunding
2.6 With peer lending, the borrowers and lenders know a lot about each other’s character. As is
2.7 Answers will vary. A key is that cell phones connect people to the web and an enormous amount
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Solutions to Problems 305
2.8 One of the attractions of awell-functioning market economy is that the most efficient firms
survive. Typically, over time the rigors of the marketplace weed out those firms with high costs
and/or low quality. Bribes and/or the use of influence rearranges that allocation. The consequence
2.9 This flight of human capital will hinder growth in an economy which is already suffering from a
terrible debt crisis. Many who are leaving have waited until they receive a college education, so
2.10 Children in developing countries may be viewed as an investment good. Children are needed to
2.11 The increase in wealth should help increase saving, which would help in raising the level of
2.12 Rapid population growth stretches a nation’s resources to their limits. As a result, when a nation’s
population is growing too quickly, its ability to save and invest is greatly hindered. It is through
savings and investment (including human capital investment) that a nation improves the ability of
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Solutions to Problems 306
3.1 For most of these countries, an increase in enrollment has been accompanied by an increase in per
capita GDP, although the percentage changes are quite varied. Notable data include the decline in
both enrollment and per capita GDP in The Gambia, the decline in enrollment but increase in per
Net enrollment rate, primary
school, percent of relevant
group
GDP per capita in current U.S.
dollars
Country 1999 2013 Percent
change
1999 2013 Percent
change
Angola 54 86 59 455.4 5,787.2 1,170
Burkina
Faso
35 67 91 267.2 716.1 168
3.2 Answers will vary
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