b. An international dispute threatens to disrupt trade between a country and its neighbor. Either move the point or the IS curve to illustrate how increased pessimism about the country's economy would influence the IS curve. Real interest rate 10 9 8 7 6 5 3 2 1 0 -5 4 -3 -2 IS -1 0 Output gap 1 2 3 4

b. An international dispute threatens to disrupt trade between a country and its neighbor. Either move the point or the IS curve to illustrate how increased pessimism about the country's economy would influence the IS curve. Real interest rate 10 9 8 7 6 5 3 2 1 0 -5 4 -3 -2 IS -1 0 Output gap 1 2 3 4

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which of the following income of a foreign corporation is not subject to the regular U.S. corporate income tax rates? A. Net long-term capital gains for which no U.S. trade or business exists. B. Capital gains effectively connected with a U.S. trade or business. C. Interest income effectively connected with a U.S. trade or business. D. FIRPTA gains.
6. Figure 1.2 represents an economy producing brooms and mops. Which of the following would represent lockdown restrictions assuming that mops and brooms are non essential products? Figure 1.2 PPI PP2 Output of Brooms a. A movement from C to A b. A movement from D to C c. A movement from F to C d. A movement from E to D Output of Mops
5 Suppose a closed economy has an aggregate saving equal to 300 and intended investment equal to 650. By how much must the government be in surplus? (round your answer to the nearest whole value)
3. Compute the complement rate and the net price using the complement method. List Trade Price Discount 16% $2,670 Complement Rate a. Complement Rate: 94%; Net Price $2,509.80 b. Complement Rate: 84%; Net Price $427.20 c. Complement Rate: 84%; Net Price: $2,242.80 d. Complement Rate: 16%; Net Price $2,242.80 Net Price
(a) Consider a closed economy whose desired savings (Sd) and desired investment (Id) are given by the following expressions: CC₂ rd where r denotes the real interest rate. Find the equilibrium in the Goods market for this economy, and represent it in a graph. From now on, suppose there are two large Countries in the world, say Canada (Ca) and the United States (US). Ca (b) To start with, assume that both Countries are closed economies. Their desired consumption (Cd) and desired investment (I) are given by: Cus Its Sd Id = = = = 100+ 600r 170 - 400r 10+ cca (Yca Tca) - 100r 15 - 100r 40+ cus (Yus - Tus) - 200r = 230 - 200r Moreover, output (Y), taxes (T), public expenditure (G), and the marginal propensity to consume (c) are as follows:
Is this right
8. Suppose that bicycles are made in the United States out of a combination of domestic and foreign parts. a. If a bike sells for $500 but requires $300 of imported parts, what is the domestic value added? b. If a 20 percent tariff is levied on bikes of the same quality and with the same features, how do the price and the domestic value added change? (Assume the United States cannot cause the world price to change.) c. What is the effective rate of protection? d. If in addition to the 20 percent tariff on the final good, a 20 percent tariff on imported parts is also levied, what is the effective rate of protection for U.S. bike manufacturers?
4.
1. Initial Effect 2. Saving Effect Suppose the United States decides to reduce export subsidies on U.S. agricultural products, but it does not decrease taxes or increase any other government spending. Initially, a reduction in export subsidies decreases net exports at any given real exchange rate, causing the demand for dollars in the foreign exchange market to decrease. This leads to a decrease in the real exchange rate, which, in turn, decreases imports to negate any decrease in exports, leaving the equilibrium quantity of net exports and the trade deficit unchanged at this point. However, the reduction in expenditure on export subsidies Real Interest Rate On the following graph, indicate the effect this has on the U.S. market for loanable funds. Real Interest Rate Supply X Demand Quantity of Loanable Funds STEP: 2 of 2 Net Capital Outflow NCO the fiscal deficit, thereby This causes the supply of dollars in the foreign exchange market to net exports to Given the change in the real…
3. Volume of trading in a day is always greater than the open interest at the end of the day.
2. Under what circumstances might an increase in worldwide interest rates be beneficial for a small open economy (SOE)? Explain.
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