Question 4: Suppose we can divide all the goods produced by an economy into two types...

Question 4: Suppose we can divide all the goods produced by an economy into two types : consumption goods and consumer goods. Capital goods such as machinery, equipment, and computers, are goods used to produce other goods.

Use a production possibilities frontier graph to illustrate the trade-off an economy between producing consumption goods and producing capital goods. Is it likely that the production possibilities frontier in this situation would be a straight line or a bowed out? Briefly explain.
Suppose technological change occurs that has a favorable effect on the production of capital goods. Show the effect on the production possibilities frontier.
Suppose that country A and country B currently have identical production possibilities frontiers but that country A devotes only 5 percent of its resources to producing capital goods over each of the next 10 years, whereas country B devotes 30 percent. Which country is likely to experience more rapid economic growth in the future? Illustrate using the production possibilities frontier graph. Your graph should include production possibilities frontier for country A today and in 10 years and the production possibilities frontiers for country B today and in 10 years.

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Rahul Sunny answered 1 year ago

Suppose we can divide all the goods produced by an economy into two types : consumption...

Suppose we can divide all the goods produced by an economy into two types : consumption goods and consumer goods. Capital goods such as machinery, equipment, and computers, are goods used to produce other goods. Use a production possibilities frontier graph to illustrate the trade-off an economy between producing consumption goods and producing capital goods. Is it likely that the production possibilities frontier in this situation would be a straight line or a bowed out? Briefly explain. Suppose technological...

In class, we developed a PPF for an economy that produced two goods with no factor...

In class, we developed a PPF for an economy that produced two goods with no factor substitution. This PPF gives some intuition for why the PPF in the the Heckscher-Ohlin Model is curved. a. Imagine an economy makes only clothes (QC) and food (QF) and has two inputs of production: Labor (L) and Capital (K). It takes 4 units of capital and 1 unit of labor to make one unit of clothing. It takes 1 unit of capital and 1...

Suppose that the British economy produces two goods: laptops and books. The quantity produced and the...

Suppose that the British economy produces two goods: laptops and books. The quantity produced and the prices of these items for 2015 and 2016 are shown in the table below: Year Quantities produced Price ($) 2015 Laptops = 60 Books = 1,000 Laptops = 200 Books = ? 2016 Laptops = 80 Books = ? Laptops = 90 Books = 12 Instructions:Round your answer to two decimal places. a. Let’s assume that the base year was 2015, so that real...

Suppose that the British economy produces two goods: laptops and books. The quantity produced and the...

Suppose that the British economy produces two goods: laptops and books. The quantity produced and the prices of these items for 2015 and 2016 are shown in the table below: Year Quantities produced Price ($) 2015 Laptops = 50 Books = 1,000 Laptops = 250 Books = ? 2016 Laptops = 90 Books = ? Laptops = 150 Books = 10 Instructions: Round your answer to two decimal places. a. Let’s assume that the base year was 2015, so that...

Suppose there are two goods in an economy, X and Y. Prices of these goods are...

Suppose there are two goods in an economy, X and Y. Prices of these goods are Px and Py, respectively. The income of the only agent (consumer) in the economy is I. Using this information, answer the following questions: a. Write down the budget constraint of the consumer. Draw it on a graph and label the critical points accordingly. Provide a verbal explanation of why all income is spent, mentioning the underlying assumption for this outcome. b. Define substitution and...

In an economy, there are only two goods (Cars and cycles) produced. The data for last...

In an economy, there are only two goods (Cars and cycles) produced. The data for last three years is given in the below table. Calculate the nominal and real GDP of three years and then find the GDP deflator for all the three years. Find year on year (YoY) inflation for 2018 and 2019. Note: the base year for this economy is given as 2017. year Price of Car(AED) Number of Car Price of cycle (AED) Number of cycle 2017...

In an economy, there are only two goods (Cars and cycles) produced. The data for last...

In an economy, there are only two goods (Cars and cycles) produced. The data for last three years is given in the below table. Calculate the nominal and real GDP of three years and then find the GDP deflator for all the three years. Find year on year (YoY) inflation for 2018 and 2019. Note: the base year for this economy is given as 2017. year Price of Car(AED) Number of Car Price of cycle (AED) Number of cycle 2017...

In an economy, there are only two goods (Cars and cycles) produced. The data for last...

In an economy, there are only two goods (Cars and cycles) produced. The data for last three years is given in the below table. Calculate the nominal and real GDP of three years and then find the GDP deflator for all the three years. Find year on year (YoY) inflation for 2018 and 2019. Note: the base year for this economy is given as 2017. year Price of Car(AED) Number of Car Price of cycle (AED) Number of cycle 2017...

The tables show combinations of two goods, steel and cloth, that can be produced in two...

The tables show combinations of two goods, steel and cloth, that can be produced in two nations ABC and RST. In ABC Steel 0 10 20 30 40 Cloth 100 75 50 25 0 In RST Steel 0 20 40 60 Cloth 300 200 100 0 a. Using figures from the table plot each nation’s production possibility curves on the back. Label each of the curves. b. Which nation has an absolute advantage in the production of cloth?_______ In steel?...

Question 1 Suppose we have two goods, whose quantities are denoted by A and B, each...

Question 1 Suppose we have two goods, whose quantities are denoted by A and B, each being a real number. A consumer’s consumption set consists of all (A; B) such that A ≥ 0 and B > 4. His utility function is: U (A, B) = ln(A + 5) + ln(B - 4). The price of A is p and that of B is q; total income is I. You have to find the consumer’s demand functions and examine their...

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Question 4: Suppose we can divide all the goods produced by an economy into two types...

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Suppose we can divide all the goods produced by an economy into two types : consumption...

In class, we developed a PPF for an economy that produced two goods with no factor...

Suppose that the British economy produces two goods: laptops and books. The quantity produced and the...

Suppose that the British economy produces two goods: laptops and books. The quantity produced and the...

Suppose there are two goods in an economy, X and Y. Prices of these goods are...

In an economy, there are only two goods (Cars and cycles) produced. The data for last...

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