Consider Gaaldine, a similarly fictional country which has no plans to cut off the rest of theworld. Their utility iswhere = 1/1.04. The interest rate is 4 percent, so 1 + r = 1.04.Output is given byΣβt log ctt=0Yt = 1.02ti.e. initial output is 1, and it grows at 2 percent per year.The initial net international investment position of Gaaldine is 0.Their per-period budget constraint is(1+r)at + (1+r) xtwhereat+1 =Yt = Xt + CtatThey must obey the transversaility condition limț→∞ (14r)t= = 0.

The objective of the question is to understand the economic conditions of the fictional country…

Answered: Consider Gaaldine, a similarly…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Peru is growing relatively quickly and has begun to attract large inflows of foreign direct investment. While Peru relishes the benefit of the inflows, it is concerned about the potential negative effects if the foreign investors pull out their investments quickly. One particular reason for Peru to be concerned is that its banks have taken out large loans denominated in U.S. dollars and European euros from foreign banks. If the foreign direct investment is withdrawn quickly from Peru, what will be the effect on each of these items? A. Peru's money supply - B. Peru's exchange rate with other countries - C. Peru's exports - D. Peru's trade deficit - Answer Bank: No Effect, Increase or Decrease
Describe the concept of capital flight and its potential consequences for a country's economy and financial stability. A) Capital flight refers to the movement of goods and services across international borders, which has no impact on an economy. B) Capital flight involves the rapid outflow of investment and financial assets from a country, potentially leading to a currency crisis, economic instability, and a weakening of the country's financial system. C) Capital flight is a government policy to attract foreign investments. D) Capital flight has no relevance to a country's economy or financial stability.
Consider the following small open economy model with production. At dates 1 and 2, the home country receives exogenous fixed endowments y1 and y2 respectively. The home country has access to the international capital market at a fixed interest rate r* at which it can save or borrow. Let the net saving of the home country be s1 and its consumption stream in two periods be given by c1 and c2 respectively.the following maximization problem: Max ln c1 + ln c2 s.t. C1 + S1 = Y1 C2 = C1(1+r*) + Y2 Derive optimal consumption and current account functions and carefully interpret it in terms of a two-period Fisherian graph. Refer to (a). Suppose the home country also has an access to an investment technology which means that if it invests k units at date 1, it produces y2 = Aka units of output in the next period where A >0 and 0 < a< 1 . Modify budget constraints for (a)Derive the optimal investment and saving rules for this economy assuming the same logarithmic utility…
The saving rate (gross domestic saving as a % of GDP) in Australia, a small open economy, was 15% in 2011 while the investment rate (domestic investment as a % of GDP) was 25%. As a result, there was net outflow of capital from Australia in 2011. Is this true, false or uncertain? Please provide your explaination.
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Suppose that a country's production function is Y = K1/2L1/2. If capital depreciates at the rate of 8 percent, consumption per worker will first [ [ Select ] v and then [ Select ] as the rate of savings increases from 0 to 100 percent. For this production function, the Golden Rule savings rate is equal to [ Select ] so the steady-state values are: capital per worker = [ Select ] %3D output per worker = [Select ] consumption per worker = [ Select ] assuming no population growth or technological change. In the steady state, if the labor force is equal to 640 workers, aggregate output is equal to [ Select ] . As long as the labor force is constant and there is no technological change, aggregate output I Select ] change once the steady state is reached. >
A mathematical approximation called the rule of 70 tells us how long it will take for something to double in size if it grows at a constant rate. The doubling time is approximately equal to the number 70 divided by the percentage rate of growth. Thus, if Panama's real GDP per person is growing at 7 percent per year, it will take about 10 years ( 70/7) to double. Apply the rule of 70 to solve the following problem: Suppose that real GDP per person in Panama in 2017 was about $13,000 per person, while it was about $52.000 per person in the United States. If real GDP per person in Panama grows at the rate of 2 percent per year, about how long will it take Panama's real GDP per person to reach the level that the United States was at in 2017? (Hint How many times would Panama's 2017 real GDP per person have to double to reach the United States' 2017 real GDP per person?) Instructions: Enter your answer as a whole number. years
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Consider the following small open economy model with production. At dates 1 and 2, the home country receives exogenous fixed endowments y1 and y2 respectively. The home country has access to the international capital market at a fixed interest rate r* at which it can save or borrow. Let the net saving of the home country be s1 and its consumption stream in two periods be given by c1 and c2 respectively.the following maximization problem: Max ln c1 + ln c2 s.t. C1 + S1 = Y1 C2 = C1(1+r*) + Y2 (a)Derive optimal consumption and current account functions and carefully interpret it in terms of a two-period Fisherian graph. Refer to (a). Suppose the home country also has an access to an investment technology which means that if it invests k units at date 1, it produces y2 = Aka units of output in the next period where A >0 and 0 < a< 1 . Modify budget constraints for (b)Derive the optimal investment and saving rules for this economy assuming the same logarithmic utility…
Solve b
The economy grows 3.59 percent per year over a 20 year period. 0.67 percent per year is attributed to labor and 1.49 percent per year is attributed to capital. Therefore, enter your response here percent per year must be due to technological progress. (Enter your response rounded to two decimal places.)
Please discuss the convergence idea extensively

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