Microsoft Word - Exam2_160B_S21.doc TAKE HOME EXAMS COVER PAGE SPRING 2021 * Write your answers directly on this exam (on printed copy or edit in PDF) * Submit completed exam by uploading to...

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Answered 1 days AfterMay 18, 2021

Answer To: Microsoft Word - Exam2_160B_S21.doc TAKE HOME EXAMS COVER PAGE SPRING 2021 * Write your answers...

Himanshu answered on May 19 2021
138 Votes
1.
Miscellaneous Short Answers
a.
Gross Domestic Product
b.
(Exports – Imports of the goods and
service) plus Net income from abroad plus Net current Transfers
c.
BOP = $186 billion
Net income factor from abroad $27 billion
Net unilateral transfer -$8billion
Capital account -$3billion
Financial Account = (186+8+3-27) = $170 billion
Financial Account = (186 -42+3) = $147 billion
Change in external wealth = 13.5%
d.
At the end year 0, W0 = (1+r*) W-1 +TB0
Zero external wealth,
W1 = 0 = (1+r*) W0 + TB1
At the end year 1,
W0 = (1+r*) ^2 W-1 + (1+r*) TB0 + TB1
Long Run Budget constraints
-(1+r*) ^2 W-1 = (1+r*) TB0 + TB1
e.
Real interest rate (r*) = 2%
Units = 1000
For 1 year,
MPK = (1050-1000)/50 = 1
For 2 year,
MPK = (1000+50+50-1000)/50 = 2
Yes, they should investment since...
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