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Consider a large open economy that can borrow and lend with the rest of the world. For each question below make sure you draw the graphs and provide explanations.
a. Draw the saving and investment diagram for the home country assuming the home country is running a current account deficit. Explain how the world real interest rate is determined.
b. Suppose new products are developed in the home country that raises the profitability of domestic industries. Assuming that this raises the demand for capital, explain what will happen to the current account balance in the home country and in the foreign country. What happens to the real world interest rate?
c. Suppose the domestic economy goes into a deep recession and the investment demand falls dramatically. What happens to the current account balance in the home country and the foreign country? What will be the correlation of the trade balance and the unemployment rate?
d. Suppose the home country increases government spending without and lowers taxes. How will this impact the current account balance in the home country and the foreign? What happens to the world interest rate?
Is there any range of production characterized by scale of economies. At Illustrate what production level are scale economies exhausted.
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Most countries have a physician workforce of one-third specialists and two-thirds generalists. The ratio is the opposite in the United States. Americans prize high-technology care, although it admittedly and often unnecessarily drives up costs. What ..
What is the relationship between potential output and the natural rate of unemployment? a. If the economy currently has a frictional unemployment rate of 2 percent, structural unemployment of 2 percent, seasonal unemployment of 0.5 percent, and cycli..
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The long run natural rate of unemployment is 5%. The current rate of unemployment is 3% what do we expect to happen if no policy is used. If no policy is used in the long run we would expect the CPI to [increase, decrease, stay the same]
How do two relate among each other in the Circular Flow Economy and to the Government and Foreign Sector components. How does all this fit on a Wheel of Income.
One solution to the problem of gender imbalances in top careers is affirmative action give women extra consideration for top jobs, or equivalently penalize men. Explain the efficiency argument for doing this.
A foundry uses 3,600 tons of pig iron per year at a constant rate. The cost per ton delivered to the foundry is $145. It costs $92 to place an order and $18 per ton per year for storage. Find the minimum-cost purchase quantity.
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