Pancraziland is a two-period small open economy with uncertainty that specializes in the production of pizza. Agents living in Pancraziland have an increasing and concave utilty function. Pancraziland starts with a negative asset position. In period 1 researchers make two important discoveries. First, they develop techniques that are able to forecast more exactly the quality of next period technology to produce pizzas. Second, they also develop a new pizza sauce that could be only produced in period 2, but that surely will generate am Increase of pizza sales. How the period 1 current account of Pancraziland will vary, in response to the new discoveries? The current account in period1 is surely positive The change in the current account is unciear because the two discoveries have effects on the current account of opposite signs The current account in period 1 is unaffected, because the discoveries wil be fruitful only in period 2 d. The current account in period 1 improves The current account in period 1 deteriorates

Pancraziland is a two-period small open economy with uncertainty that specializes in the production of pizza. Agents living in Pancraziland have an increasing and concave utilty function. Pancraziland starts with a negative asset position. In period 1 researchers make two important discoveries. First, they develop techniques that are able to forecast more exactly the quality of next period technology to produce pizzas. Second, they also develop a new pizza sauce that could be only produced in period 2, but that surely will generate am Increase of pizza sales. How the period 1 current account of Pancraziland will vary, in response to the new discoveries? The current account in period1 is surely positive The change in the current account is unciear because the two discoveries have effects on the current account of opposite signs The current account in period 1 is unaffected, because the discoveries wil be fruitful only in period 2 d. The current account in period 1 improves The current account in period 1 deteriorates

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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