The Dictator of Turan Has Recently Begun to Arbitrarily Seize

question 14

Multiple Choice

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. Other things equal, we would expect that the growth rate in Turan will

• A)fall temporarily, but will return to where it was when the new owners learn how to farm.
• B)increase because the total amount of human capital in the country will increase as the new owners learn how to farm.
• C)fall and remain lower for a long time.
• D)not be affected unless widespread civil disorder or civil war results.

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Definitions:

Internal Rate of Return

The discount rate at which the net present value of all cash flows from a particular project equals zero.

Increased Efficiency

Improvements in operational performance that allow for the same or higher levels of output with less input, often through better processes or technology.

Annual Cash Savings

The amount of money saved in a year through various cost-cutting measures or efficiency improvements.

Salvage Value

An asset's expected selling price once it has concluded its functional life.