EBK MINDTAP ECONOMICS FOR BOYES/MELVIN'
10th Edition
ISBN: 9781305387614
Author: MELVIN
Publisher: VST
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Chapter 2, Problem 7E
To determine
The answer from the given options that states the situation that denotes
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4. Assume that a country produces an output Q of 50 every year. The world interest rate is 10%.
Consumption C is 50 every year, and I = G = 0. There is an unexpected drop in output in year
0, so output falls to 28 and is then expected to return to 50 in every future year. If the country
desires to smooth consumption, how much should it borrow in period 0? What will the new
level of consumption be from then on?
2. Show how each of the following would affect the following US balance of payments: trade
balance (TB), net factor income abroad (NFIA), net unilateral transfers (NUT), financial
account (FA), and capital account (KA). Identify which specific account is affected in each
case (e.g., +$10 in TB). Note that the sum of the balance of payment accounts is zero.
Example:
A California computer manufacturer purchases a $50 hard disk from a Malaysian company,
paying the funds from a bank account in Malaysia.
Answer:
The US imports a hard disk from Malaysia: TB = $50
The US draws a foreign asset to pay for the import (less external asset): FA = +$50.
(Note: The balance of payment identity holds: CA + FA (+KA) = −- $50 + $50 = 0. No KA in
this example.)
a. A US tourist in Japan sells his iPod to a local resident for yen worth $100. (hint: A US
tourist obtains Japanese currency.)
b. A US owner of Honda shares receives $10,000 in dividend payments, which are paid into
a Tokyo bank.
c. The central…
Mark's Pizza
Enter
George's Pizza
Stay Out
Advertise
$50, -$2
$175, $0
Do Not
Advertise
$150, $15
$100, $0
In their quest to maximize combined total
profits, Mark and George's Pizzas find
themselves at a critical juncture. As they
carefully evaluate the potential outcomes and
weigh their strategic options, the future of
Moncton's pizza industry hangs in the balance.
Let's imagine both players are analyzing the
payoff matrix seeking the optimal combination
of actions that will yield the highest collective
profit. What actions maximize their combined
total profits?
a. Mark's Pizza to "Advertise" and
George's Pizza to "Stay Out".
b. Mark's Pizza to "Do Not Advertise" and
George's Pizza to "Stay Out"
C. Mark's Pizza to Do Not Advertise" and
George's Pizza to "Enter"
d. Mark's Pizza to "Advertise" and
George's Pizza to "Enter"
Chapter 2 Solutions
EBK MINDTAP ECONOMICS FOR BOYES/MELVIN'
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