4.) (20 points) Fast forward to the future. It is 2032. Through the many unpredictable twists and turns life takes, you are now part of a team of hot-shot business and financial experts brought in to advise the government of a developing economy, Country A. Country A is located on the East coast of sub-Saharan Africa. Its capital is the city of Capitalville. Like other countries of sub-Saharan Africa, rainfall is low and highly variable, there are few natural harbors on its coast, and these harbors are shallow. The soils are very fragile and rapidly being depleted of nutrients through overuse, and rivers are largely unnavigable except in the rainy season. The leaders of country A are very taken with a proposal that a public relations firm from Canada has come up with. The firm suggests that the government launch an ad campaign extolling the virtues of sending children to school and increasing private investment. The ads would also call for good governance (government that is responsive to constituents and where corruption is low). This campaign would run on TV and in the country's major papers. The total cost would be $1 billion Your team is arguing that this huge sum of money could be much better spent. How? Your group of experts proposes to use the $1 billion to (1) fund a program like a Oportunidades in Mexico or Auxilio Brasil in Brazil, (2) to help foster the development of microcredit lending organizations like the Grameen Bank, and (3) to help pay lower level and middle level government officials higher salaries, to make it easier for those with complaints about government corruption to register these complaints, and finally to provide staff to investigate these complaints and, if necessary, to prosecute offenders. Currently the payoffs to government officials from corrupt (C) behavior versus honest behavior (non-corrupt or N) are given by the following: Use the following diagrams in your answer to part b. PF y(t), sy(t), II(t) RIF PIE $2.42 $1.07 k(t) b.) (10 points) Explain to Country A's leaders why your group's proposal is much more likely to lead to a significant increase in real per capita income in a shorter period of time. Be sure to include in your answer a discussion of how your group's proposal could, through (1), push up Country A's production function and through (2) and (3), push up Country A's PIF more decisively and faster than the lousy Canadian PR firm's proposal would. Also explain the connection between y(t) and RPCI
