Homework Answers
At 10% world equilibrium real interest rate, the home countries savings are much lower than its investments. So the home country will have to borrow for the investments it is incurring, thus home is a net borrower.
The foreign large economy saves much more and invests less at the 10% interest rate, thereby the home country borrows from the foreign economy and which is the reason it has a current account deficit with the foreign economy.
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The graphs below show the saving and investment schedules for two large open economies. Home Foreign...
Consider two large open economies, the home economy and the foreign economy. In both countries th...
Can someone please explain?
Consider two large open economies, the home economy and the foreign economy. In both countries the following relationships hold Domestic Foreign Desired consumption, Cd-320 + 0.4(Y-T)-200rw. Desired investment, 150 200* Output, Y = 1.000 Taxes, T 200 Government purchases. G 275 Fr4800.4(YFr To 300r. For 225 300 For1,500 For-300 For 300 a. What is the equilibrium interest rate in the international capital market?(Enter your response as a decimal rounded to three places.) What are the equilibrium...
2. Consider a large open domestic economy with a financial account surplus. i. Draw a diagram sho...
2. Consider a large open domestic economy with a financial account surplus. i. Draw a diagram showing this situation (Your answer should include two graphs, one for the omestic economy and one for the foreign economy). (10 Points)- Note: Draw the two graphs side by side and clearly indicate the world interest rate as a single line going through both graphs. ii. What are the effects, in equilibrium, on the world real interest rate, domestic national saving, domestic investment, the...
7. Consider Two large open economics, the home economy and the foreign economy. In the home count...
7. Consider Two large open economics, the home economy and the foreign economy. In the home country the following relationships hold: desired consumption, Cd = 420+0.4(Y-T)-200rw desired investment, Id =250-200rw output, Y =1000 TAXES, t = 200 Government purchases, G =275 In the foreign country the following relationships hold: Desired consumption, Cdfor = 480+0.4(Yfor-Tfor)-300rw Desired investment, Idfor=225-300rw Output, Yfor = 1500 Taxes, T for =300 Government purchase, G for =300 What is the equilibrium interest rate in the international capital...
Consider a world with on two coun nes, which are designated the home country H and the F) You are g ven the reign coun...
Consider a world with on two coun nes, which are designated the home country H and the F) You are g ven the reign country ollowing information about each country Saving and nvestment ere an S 10 bil on and s n % Home Country Foreign Count Sy 2.5 + 0.5 SF = 1.0 + 1.0 Investment a-80-10 -65-0.5 a. What is the equilibrium value of the world real interest rate and the current account balance in each country? b....
Consider two open economies in which the real exchange rate is fixed and equal to one....
Consider two open economies in which the real exchange rate is fixed and equal to one. Consumption, investment, government spending, taxes, imports and exports are given by equations below for each economy. Variables with * denote values for the foreign economy. Domestic Economy: C= 12 + 0.8 (Y-T) I= 8 G= 10 T=11 IM= 0.2Y EX= 0.2Y* Foreign Economy: C*= 12+ 0.8 (Y*-T*) I*=8 G*=10 T*=11 IM*= 0.2Y* EX= 0.2Y a) Solve for the equilibrium output in the domestic economy,...
1. Given the information in Table 1, in a two country and two-product Ricardian model, which...
1. Given the information in Table 1, in a two country and two-product Ricardian model, which of the following statements is (are) true? Table 1 Unit Labour Requirements T-shirt Brandy 4 hours 12 hours 6 hours 12 hours United States France A) The pretrade price ratio in France is 1 brandy - 2 T-shirts. B) The US pretrade price ratio is 1 brandy - 4 T-shirts. C) The US pretrade price ratio is 1 T-shirt = 1/3 brandy. D) The...
Can someone please explain?
Consider two large open economies, the home economy and the foreign economy. In both countries the following relationships hold Domestic Foreign Desired consumption, Cd-320 + 0.4(Y-T)-200rw. Desired investment, 150 200* Output, Y = 1.000 Taxes, T 200 Government purchases. G 275 Fr4800.4(YFr To 300r. For 225 300 For1,500 For-300 For 300 a. What is the equilibrium interest rate in the international capital market?(Enter your response as a decimal rounded to three places.) What are the equilibrium...
2. Consider a large open domestic economy with a financial account surplus. i. Draw a diagram showing this situation (Your answer should include two graphs, one for the omestic economy and one for the foreign economy). (10 Points)- Note: Draw the two graphs side by side and clearly indicate the world interest rate as a single line going through both graphs. ii. What are the effects, in equilibrium, on the world real interest rate, domestic national saving, domestic investment, the...
Consider a world with on two coun nes, which are designated the home country H and the F) You are g ven the reign country ollowing information about each country Saving and nvestment ere an S 10 bil on and s n % Home Country Foreign Count Sy 2.5 + 0.5 SF = 1.0 + 1.0 Investment a-80-10 -65-0.5 a. What is the equilibrium value of the world real interest rate and the current account balance in each country? b....
1. Given the information in Table 1, in a two country and two-product Ricardian model, which of the following statements is (are) true? Table 1 Unit Labour Requirements T-shirt Brandy 4 hours 12 hours 6 hours 12 hours United States France A) The pretrade price ratio in France is 1 brandy - 2 T-shirts. B) The US pretrade price ratio is 1 brandy - 4 T-shirts. C) The US pretrade price ratio is 1 T-shirt = 1/3 brandy. D) The...
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