Explanation

Country 1 (Option A) has the highest GDP growth potential based on the labor productivity growth accounting equation:

Growth Accounting Equation: GDP Growth = Growth in Labor Force + Growth in Labor Productivity

Calculations:

• Country 1: -2.0% + 3.0% = 1.0%
• Country 2: -1.0% + 1.0% = 0.0%
• Country 3: -0.5% + 2.0% = 1.5%

Wait, let me recalculate:

• Country 1: -2.0% + 3.0% = 1.0%
• Country 2: -1.0% + 1.0% = 0.0%
• Country 3: -0.5% + 2.0% = 1.5%

Actually, Country 3 has the highest GDP growth potential at 1.5%. Let me double-check the question...

Looking at the data again:

• Country 1: Labor force growth = -2.0%, Labor productivity growth = +3.0%
• Country 2: Labor force growth = -1.0%, Labor productivity growth = +1.0%
• Country 3: Labor force growth = -0.5%, Labor productivity growth = +2.0%

Correct calculations:

• Country 1: -2.0% + 3.0% = 1.0%
• Country 2: -1.0% + 1.0% = 0.0%
• Country 3: -0.5% + 2.0% = 1.5%

Country 3 has the highest GDP growth potential at 1.5%. The correct answer should be C.

Correction: The answer is C. Country 3 with 1.5% GDP growth potential.