Leonard, a company that manufactures explosion-proof motors, is considering two alternatives for expanding its international export capacity. Option 1 requires equipment purchases of $600,000 now and $500,000 two years from now, with annual M&O costs of $90,000 in years 1 through 10. Option 2 involves subcontracting some of the production at costs of $240,000 per year beginning now through the end of year 10. Neither option will have a significant salvage value. Use a present worth analysis to determine which option is more attractive at the company’s MARR of 16% per year. (Note: Check out the spreadsheet exercises for new options that Leonard has been offered recently.) (using a spreadsheet)

Explain how international institutions such as World Trade Organization (WTO), General Agreement on Tariffs and Trade (GATT), World Bank and IMF provide public goods. Discuss the contributions of these international institutions to the world economy as well as the criticisms against their services and policies.

Regional trade agreements (RTA) were covered in class, where the arguments suggested by the proponents and the opponents of RTA were also discussed. State your personal opinion on RTA focusing on potential benefits and damages for world trade and giving examples.

The market for wool in the economy of Odessa is shown in the table below (note that quantities are given in tonnes per year).

Discuss the statement "No country is abundant in everything." from the perspective of the Heckscher-Ohlin Model.

The data in the table below are for the small country of Xanadu. Assume that the economy is originallly producing combination C.

Give detail answer of the parts given below as soon as possible. 'Socio-economic conditions (SEC) includes:

1. meaning of SEC,

2. Definition of SEC,

3. Concept of SEC,

4. Causes of good and poor SEC,

5. Consequences of good and poor SEC.

International trade theory implies that international trade benefits all trading countries. However, empirical observation confirms widespread restrictions to international trade flows imposed officially by countries. How might these two facts be reconciled? Discuss.

With the onset of the coronavirus pandemic, Jerome Powell, the head of the U.S. Fed, decided to step up the Fed’s purchases of bonds to unprecedented levels.

a. Using wealth portfolios, symbols, and diagrams (that are neither especially Keynesian or Classical) illustrate the effect of the Fed’s purchase of short-term bonds would have on the money market, the bonds market, the level of investment, and the levels of real output in the U.S. economy.

b. But many financial observers worry about the effect of a flight to cash even from holders of relatively liquid assets such as money market mutual funds and the anxiety that banks and corporations feel about an increasingly uncertain economic future will have on the effectiveness of the fed’s policy.

Using a money market diagram, an investment schedule, and an IS/LM diagram illustrate and explain the likely effect of those conditions on the effectiveness of the Fed buying bonds.

a) Assume that yesterday (April 22, 2020) the interest rate on dollar deposits in the U.S. was 0.02 (2%) per year and the interest rate on euro deposits was 0.02 (2%) per year. Investors yesterday expected that the exchange rate in one year (April 22, 2021) will be 2.02 dollars for one euro.

What was the current exchange rate in terms of dollars per euro yesterday (April 22, 2020)?

Illustrate your answer, using a graph with the rates of return (in dollars terms) on the horizontal axis, and the exchange rate on the vertical axis.

b) Now, assume that today (April 23, 2020) the Federal Reserve lowers the interest rate on dollar deposits to 0.01 (1%), and the European Central Bank lowers the interest rate on euro deposits to zero (0%). There is no change in the expected exchange rate a year from now - that is, on April 23, 2020 investors expect that the exchange rate on April 23, 2021 will be 2.02 dollars for a euro.

What is the current exchange rate today (April 23, 2020), right after the reductions in the interest rates? Has the dollar depreciated or appreciated between April 22 and April 23? Why? Is your answer consistent with the textbook’s claim that a reduction in the interest rate on dollar deposits should cause a depreciation of the dollar?

Illustrate your answer, using a new graph with the rates of return (in dollars terms) on the horizontal axis, and the exchange rate on the vertical axis.

c) What is the effect of the change in the exchange rate above (from April 22 to April 23, 2020) on exports of American goods to Europe? And on exports of European goods to the United States? Explain. (You don’t need to provide numbers, only the general direction of the changes: going up or going down). Who will benefit and who will lose from these changes in the United States?

d) Now, assume American exporters successfully lobby the Federal Reserve, and convince it to adopt a new monetary policy that will boost American exports. Thus, on April 24 the Federal Reserve decides to change the interest rate on dollar deposit once again, with the objective to cause a 1% depreciation of the dollar with respect to the euro (that is, a 1% increase in the amount of dollars required to buy a euro). Assume that the European Central Bank does not react to the new actions by the Federal Reserve, and that investors’ expectations about the future value of the euro remain unchanged (that is, they expect that the exchange rate on April 24, 2021 will be 2.02 dollars for a euro). What interest rate should the Federal Reserve select in order to achieve its objective? Explain.

Illustrate your answer, using a new graph with the rates of return (in dollars terms as usual) on the horizontal axis, and the exchange rate on the vertical axis.

e) Now assume that, unlike in part d), investors, when they hear that the Federal Reserve intends to devaluate the dollar today, also adjust their expectations about the future: now, they expect that the exchange rate on April 24, 2021 will be 2.0402 rather than 2.02. What interest rate should the Federal Reserve select now, on April 24, 2020, in order to achieve its goal of depreciating the dollar by 1% from April 23 to April 24? Explain (no need to illustrate this answer graphically, just give the answer in words).

Maurice has the following utility function: u (X, Y) = 50X + 60Y - 5X² - 2Y², where X is his consumption of CDs with price of $ 5 and Y is his consumption of movie videos, with a rental price of $ 6. He have plans to spend $ 460 on both forms of entertainment. Determine the number of CDs and video rentals that will maximize Maurice's utility. What is Maurice's maximum utility equal to? (Hint 1: MU, = 50 - 10X, MU, = 60 - 4Y) (Hint 2: MU, / P, = MU, / P;)

1. Suppose that the U.S. International Trade Commission (USITC) is considering using trade policies to protect U.S. wheat farmers/producers. The USITC plans to use the following trade policies: (i) an export subsidy (ii) a production subsidy; (iii) an export tariff; and (iv) an export quota. Assume that the U.S is a small Home country in the world market for wheat.

a. As an international trade lobbyist for U.S consumers and taxpayers, which two of the four forms of trade policies would you strongly support and why? [20%] [ Approximately 200- 400 words]

b. From the remaining two forms of trade restrictions, which one would you oppose strongly and why? [10%] [ Approximately 100- 200 words]

Draw the graphs to explain the changes in consumer surplus, changes in producer surplus, changes in government revenue and the net welfare loss due to each of the trade policies that you have selected. Be sure to discuss other important differences among the trade policies for the organization that hired you as a lobbyist.

Please use the following table, which represents the costs and benefits of a new bridge.

Now consider the following interest rates 0%, 10% and 50%. Calculate

A the net benefits with all interest rates

B the benefit-cost ratio with all interest rates     

a) Obtain the value of nominal GDP and real GDP in 2018 and 2019 for this economy.

b) Explain why looking just at the evolution of nominal GDP would make an analyst erroneously conclude that this economy has gone through a severe crisis/recession in 2015

Income Gap Growing In 2009, people in the highest quintile had 24.6 times as much market income as those in the lowest quintile, but after taxes and transfers the people in the highest quintile had 9.1 times as much income as those in the lowest quintile. In 1989, the people in the highest quintile had 7.2 times more income after taxes and transfers than those in the lowest quintile. In 1990, 82.9 percent of the unemployed received unemployment benefits. In 2009, 47.8 percent of the unemployed received unemployment benefits. Source: Conference Board of Canada, July 13, 2011

How have changes in employment insurance changed the income gap between the richest and the poorest Canadians?