K possible Submit test Explain the analogy between international borrowing and lending and ordinary international trade. The analysis of intertemporal trade follows directly the analysis of trade of two goods. Instead of two goods, you have The relative price of future consumption is Present consumption is interest rates. This country will "export" present consumption (i.e. lend) to countries vai end relatively cheap in the country that has relatively in which present consumption is relatively dear. The equilibrium real interest rate after borrowing and lending occur lies between that found in each country before borrowing and lending take place. Gains from borrowing and lending are analogous to gains from trade-there is efficiency in the production of goods intertemporally.

K possible Submit test Explain the analogy between international borrowing and lending and ordinary international trade. The analysis of intertemporal trade follows directly the analysis of trade of two goods. Instead of two goods, you have The relative price of future consumption is Present consumption is interest rates. This country will "export" present consumption (i.e. lend) to countries vai end relatively cheap in the country that has relatively in which present consumption is relatively dear. The equilibrium real interest rate after borrowing and lending occur lies between that found in each country before borrowing and lending take place. Gains from borrowing and lending are analogous to gains from trade-there is efficiency in the production of goods intertemporally.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter1: Welcome To Economics!

Section: Chapter Questions

Problem 6SCQ: Suppose we extend the circular flow model to add imports and exports. Copy the circular flow diagram...

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Suppose we extend the circular flow model to add imports and exports. Copy the circular flow diagram onto a sheet of paper and then add a foreign county as a third agent. Draw a rough sketch of the flows of imports, exports, and the payment for each on your diagram.
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