Question

The dictator of a country requires that companies planning to open or expand must pay a large fee to file an application one year prior to building new factories or expanding existing ones. Other things the same, in the long run this requirement would _______.

Answer 1

Answer: Reduce GDP per person and productivity.

Gross Domestic Product, also known as GDP, is a universal measure that calculates the prosperity of nations and their economic growth. It is possible to know how much economic production value can be attributed to each citizen through per capita GDP. If the government of a country puts obstacles to the creation of new companies or the expansion of existing ones, it can result on the reduction of GDP per person and productivity. However, if the dictator of a country makes it easier for companies to be created and expanded, the GDP per person will increase.