Two countries decide to specialize in producing certain goods to export to other countries, and in...

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Two countries decide to specialize in producing certain goods to export to other countries, and in return they import differe

When interest rates decrease: O no one benefits from this change. O everyone benefits from this change. O people who are borr

A country has GDP per capita equal to $5,000. If the countrys GDP per capita increases at a rate of 3.96% per year then acco

In the loanable funds market the demand for funds comes from: O firms who want to borrow to pay for new capital. O the govern

business economics

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Answer 1

Answer #1

Question 1

Trade enables the countries to increase their consumption of goods and services.

So,

The advantage of these exports and imports is the country will be able to consume at a point outside your production possibilities frontier.

Question 2

Decrease in interest rate reduces the cost of borrowing. When cost of borrowing decreases, borrowers tends to benefit.

Thus,

When interest rates decrease people who are borrowing money will benefit from this change.

Question 3

GDP per capita = $5,000

Annual growth rate of GDP per capita = 3.96%

Calculate the number of years in which GDP will be doubled (Using Rule of 70) -

Number of years in which GDP would be doubled = 70/Annual growth rate of GDP per capita = 70/3.96 = 17.67

Thus, in approximately 18 years, the GDP would be doubled to $10,000.

In another 18 years, it would again doubled to $20,000.

Thus,

It will take 36 years for GDP per capita to equal $20,000.

Question 4

Demand in loanable funds market indicates the borrowing of funds.

In general, firms borrow funds for business operations and expansion activities.

Thus,

In loanable funds market the demand for funds comes from firms who want to borrow to pay for new capital.

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Answer 2

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