Economics in the Short-Run, an Thesis

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When debt becomes a multiple of GDP, then responsible government is not being undertaken.

16- 3) a. The equilibrium is .016 dollars per peso.

b. If the Philippine government set the exchange rate at 50 peso, they would need to sell 20 pesos per month, because supply would be 60 and demand would be 80.

16-7) a) A country would want an overvalued currency if they were a net importer of goods. This would make foreign goods cheaper. The policy would cause harm to that country's exporters.

b) A country would want an undervalued currency in order to facilitate exports. This would cause harm to importers, other countries who want to sell their goods in that market, and to their own citizens traveling abroad.

16-9) a) The exchange rate would be the equilibrium point. In this case, $0.90 dollars per euro.

b) If there is no intervention, the new equilibrium point would be $1.00 per euro, so that will be the new exchange rate.

c) The European central bank would need to created an additional 700 euros of supply.

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They cannot do this -- they have buy the 300 euros from the U.S., but the 400 dollars they sell is only worth 360 euros at the given exchange rate. Thus, they can only create 660 euros, not 700.

17-1) a) The opportunity cost of another winter hat in Russia is 2 bushels of wheat. The opportunity cost of another winter hat in the U.S. is 10 bushels of wheat.

b) The opportunity cost of another bushel of wheat in Russia is 0.5 winter hats. In the U.S. It is 0.1 winter hats. Russia has the comparative advantage in winter hats; the U.S. In wheat.

17-3) a) The equilibrium price of beef is $8; equilibrium supply is 80. European producers will supply 20 pounds at 2€/lb; consumers will demand 140 lbs. Thus, 120 lbs will be imported. Domestic beef producers lose when trade opens up, beef consumers and foreign beef producers gain.

17-9) a) New Zealand has the absolute advantage in both.

b) The opportunity cost for wool is 0.167 rugs in NZ, 0.5 rugs in India......

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