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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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