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Consider a two-period economy that has at the beginning of period 0 net foreign assets of 100. In period 0, the country runs a current account deficit of 5 percent of GDP, and GDP in both periods is 120. Assume the interest rate in periods 0 and 1 is 10 percent. 1. Find the trade balance in period 0, the current account balance in period 0, and the country's external wealth at the beginning of period 1. 2. Is the country living beyond its means? To answer this question, find the country's current account balance in period 1 and the associated trade balance in period 1. Is this value for the trade balance feasible? [Hint: Keep in mind that since expenditures cannot be negative, the trade balance cannot exceed GDP]. 3. Now assume that in period 0, the country runs instead a much larger current account deficit of 10 percent of GDP. Find the country's external wealth at the end of period 0. Is the country living beyond its means? If so, why?
You are the manager of a supermarket, and you know that the income elasticity of peanut butter is exactly −0.5. Due to the economic recession, you expect incomes to increase by 10 percent next year. How should you adjust your purchase of peanut butte..
q.the world is composed of two economies the european union and the united states. one of the european firms has a
q.assume you are a typical consumer and expect to work for 40 years from this point onward and to live for 10 years
It was reported that Japan's fishing, aquaculture (tuna and salmon), food processing factories and cold storage areas had been badly affected.
Assume which all other banks hold only the required amount of reserves. If Nan Bank Inc. decides to reduce its reserves to only the required amount, by how much would the economy's funds provide increase.
Explain why income inequality has changed in recent history. In the United States, what are some of the reasons for a less equal distribution of income over the past two decades? How has this been reflected in society, particularly in light of the qu..
If a perfectly competitive firm raises its price above the prevailing market rate, how much of its sales might it lose? Why? Can a competitive firm ever raise its prices? If so, when? How does an employer-paid Social Security tax on wages affect a co..
The Federal Reserve decreases the required Reserve Deposit ratio and it now equal to 20%. Show the new balance sheet of the commercial bank. Find the new money supply in the economy.
One reason firms in monopolistic competition can charge different prices is that their products are identical 2 similar 3 differentiated 4 guaranteed. The Clayton Act prohibits price discrimination. In monopolistic competition, there is no need for..
Suppose James has utility over wealth given by u(w) = w 1 2. Putting utility on the y-axis and wealth on the x-axis, use a graph to show why James would rather have $100 for sure instead of a gamble where he gets $20 20% of the time and $120 the rest..
Consider a market whose supply and demand curves are given by P = 4Q ^S and P = 12 - 2Q^D. Calculate the equilibrium price and quantity (P* and Q*) assuming the market is unregulated. What is the total surplus at the equilibrium? Calculate the price ..
Consider two maple syrup producers that engage in Cournot competition. Inverse demand for maple syrup is given by P(Q) = 16 − Q and the marginal cost of each producer is 4. The two producers compete with each other each period by choosing an amount o..
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