1.Assume the government imposes new regulations are introduced which raise the cost of starting a new business. a. Why might this policy decrease long run economic growth? (This is more likely.) b. Why might this policy increase long run economic growth?

2.Country A has a per capita real GDP of $7500. Country B has a per capita real GDP of $45,000. a. According to the theory of economic convergence, if the two countries spend the same amount on capital investment, which country do you expect to grow faster? b. Explain your answer. c. Offer one possible reason why the convergence theory may not work.