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A Californian college student consumes Internet services (I) and books (B). Her preferences are represented by a Cobb?Douglas utility function: U(I,B) = I1/4B1/4. The price of each good is $2 and the student has an income of $200. Over the course of the past year, the price of internet services has risen to $4, but the price of books has remained the same. The government has decided provide this student with additionalmoney to compensate for the higher price of internet services. In order to determine the transfer the government has two consultants who have made the following suggestions:Consultant A: The student's income should be increased by a percentage found using a consumer price index (CPI).Consultant B: The additional income should allow the student to get her initial level of utility.
Is the transfer implied by consultant B more or less than the amount implied by A? Explain.
What is the precise dollar amount implied by consultant B?
Explain the dierence between Covered and Uncovered Interest Parity Arbitrage. What risks does a US investor face when buying Mexican government bonds, and trying to exploit these arbitrage strategies?
Using supply and demand analysis for manufactures and assuming Canada is a high priced producer compared to the US, draw the supply and demand curves for Canada and the US as well as the import demand and supply curves assuming free trade
Based on government report, the U.S. can manufacture 3-computers or 3,000 cases of win with one unit of resources, while Germany can manufacture one computer or 5,000 cases of whine with one unit of resources.
Explain the concept of comparative advantage and the principle theories of why trade occurs and analyze and discuss the sources of comparative advantage in national economies.
Describe the pros and cons of each. If your company intends to purchase products from a foreign source, how will you protect it from risk of financial loss? Support and defend your choice.
Imagine you are a manager at the DaimlerChrysler. Daimler Chrysler has lost money on Smart car since 1st model rolled off the assembly line in 1998.
The customer price index is a fixed weight index. It compares the price of fixed bundle of goods in 1-year with the value of the same bundle of goods in some base year.
Right now many economies around the world are growing much faster than the United States. That means that the gross domestic product (GDP) of countries like China, India, Brazil, and Russia is increasing every year at a faster rate.
Let us determine what happens to exchange rate between the U.S. and imaginary country of Oz. The ruler of Oz is a totalitarian wizard. Since the economy of Oz is centrally planned
Describe some models that forecast the effect that reducing protection Tariffs will have on factor prices Labour and capital.
Assume that both the stock market and housing prices fall in the United State 1st, describe the channels through which these shocks affect aggregate demand for goods and services.
Suppose that in Canada opportunity cost of manufacturing 2 television sets is 3 bushels of wheat. Suppose that in the United States the opportunity cost of manufacturing 2 bushels of wheat is 3 television sets.
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