Question 2 (a) Distinguish between a government deficit and trade deficit? (b) Would you rather live in a nation with a with a high per capita GDP and a low grow th rate, or in a nation with a low per capita GDP and a high growth rate? (c) Briefly explain the quantity theory of money and how it is rela ted to inflation. (d) Suppose A&K Sound System is considering building a reco rd studio in Cayman Islands. (i) Assume that A&K Sound System needs borrow money on the bond market. Why would an increase in interest ra tes affect the decision whether to build the studio? (ii) If A&K Sound System has enough of its funds to finance the new studio without borrowing, would an increase in interest still affect the decision about whe then to build the studio? Explain your ans wer.
Question 2 (a) Distinguish between a government deficit and trade deficit? (b) Would you rather live in a nation with a with a high per capita GDP and a low grow th rate, or in a nation with a low per capita GDP and a high growth rate? (c) Briefly explain the quantity theory of money and how it is rela ted to inflation. (d) Suppose A&K Sound System is considering building a reco rd studio in Cayman Islands. (i) Assume that A&K Sound System needs borrow money on the bond market. Why would an increase in interest ra tes affect the decision whether to build the studio? (ii) If A&K Sound System has enough of its funds to finance the new studio without borrowing, would an increase in interest still affect the decision about whe then to build the studio? Explain your ans wer.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter29: Exchange Rates And International Capital Flows
Section: Chapter Questions
Problem 24CTQ: Can you think of any major disadvantages to dollarization? How would a central bank work in a...
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