Suppose the two countries can trade shares in the ownership of their perspective assets. Further, assume that a Home owner of a 10 percent share in Foreign land
He will receive 10 percent share in Foreign land, and thus receives 10 percent of the annual Foreign kiwi fruit harvest. Further assume that a Foreign owner of a 10 percent share in Home land is permitted. In this case, a Foreigner is entitled to 10 percent of the Home harvest. Calculate the expected value of kiwi fruit for each investor. Is the investor better off?
Good year at Home: the farmer will get 90 toms of kiwi from home and 5 tons of kiwi from Foreign. Bad years at home: he will get 45 tons of kiwi from his Home and 10 tons from the Foreign country, namely 55 tons. The probability for a good or a bad year is 0.5. Thus the expected returns will now be:
0.5 ∗ 95 + 0.5 ∗ 55 = 75
It is not clear whether the investor is better off or not. If he likes to smooth his consumption, he may be better off. Otherwise, it is impossible to tell without a particular utility function.
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Which of the following best explains why the federal tax rebates in 2008 and 2009 had almost no effects on aggregate demand?
A) According to Ricardian equivalence theorem, those tax rebates did not affect aggregate demand because they were accompanied by more government spending. B) According to the permanent income hypothesis, those one-time tax rebates did not affect consumption because taxpayers did not believe the rebates would occur. C) According to Ricardian equivalence theorem, those tax rebates did not affect aggregate demand because there were no direct expenditure offsets. D) According to the permanent income hypothesis, those one-time tax rebates did not affect consumption because they did not change taxpayers' permanent income.
The demand for dollars in the foreign exchange market will decrease and hence the demand curve for dollars will shift leftward if
A) the U.S. interest rate differential decreases. B) the expected future exchange rate rises. C) the exchange rate for the dollar rises. D) the U.S. interest rate differential increases.
Which of the following explains the shape of an average total cost (ATC) curve?
a. Average fixed cost drives up ATC at very high levels of output. b. ATC is high at both very small and very large levels of output. c. ATC curves are U-shaped because variable input costs fluctuate. d. ATC is low at low output and high at high output.
A new major league baseball expansion team is moving to your town. It will inject consumer spending worth $40 million into your local economy initially. The Chamber of Commerce predicts that this will generate a total of $500 million in additional spending for your town. The team owners think that this is an underestimate. What do you need to know to figure out who is right? Explain.
What will be an ideal response?