Q. The U.S. economy appears to be performing well: Output growth has returned to healthy levels, the labor market is firming, and inflation appears to be under control. But, one aspect of U.S. economic performance still evokes concern: the nation’s large and growing current account deficit (negative net exports). Most forecasters expect the nation’s current account imbalance to decline slowly at best, implying a continued need for foreign credit and a concomitant decline in the U.S. net foreign asset position.

a. Why is the United States, with the world’s largest economy, borrowing heavily on international capital markets—rather than lending, as would seem more natural? b. What implications do the U.S. current account deficit (negative net exports) and our reliance on foreign credit have for economic performance in the United States?

True or False - why?

1. Japan is a wheat importer that represents a small share in the world demand for wheat. Japan lowers its wheat tariff from 20% to 10%.

Question: Japanese consumption of wheat increases as a result of the tariff reduction.

2. Japan is a wheat importer that represents a small share in the world demand for wheat. Japan lowers its wheat tariff from 20% to 10%.

Question: The world price of wheat falls

3. Suppose the United States heavily subsidizes the production of rice by providing water to rice growers at rates considerably below market prices. Rice production is a constant returns to scale technology, the US is the largest producer of rice in the world, and the subsidized rice is consumed in both the United States and Japan.

Question: Total Japanese welfare is harmed by the subsidy because it drives Japanese farmers out of business.

Explain the branching restrictions imposed by the McFadden Act of 1927. When was the McFadden Act abolished? What law overturned the McFadden Act?

(3) Explain the separation of financial services regulated by the Glass-Steagall Act of 1933 (= Banking Act of 1933). When was the Glass-Steagall Act abolished? What law repelled the Glass-Steagall Act? Q. 3 (2 points)

(1) The number of commercial banks in the United States reached 23,000 in 1929, just before the outbreak of the Great Depression, but the number decreased to 14,125 by 1935. What was the main reason for such a drastic decrease in the number of commercial banks during the 1929-1935 period?

(2) The number of commercial banks in the United States reached 14,388 in 1980, but the number decreased to 5,116 as of March 2020. What was the main reason for such a drastic decrease in the number of commercial banks during the 1980-2020 period?

The average annual premium for automobile insurance in the United States is $1520. A representative sample of annual premiums for the state of Michigan is contained in the Excel Online file below. Assume the population is approximately normal. Construct a spreadsheet to answer the following questions.

a. Provide a point estimate of the mean annual automobile insurance premium in Michigan. To the nearest dollar.

b. Develop a 95% confidence interval for the mean annual automobile insurance premium in Michigan.To the nearest cent.

c. Does the 95% confidence interval for the annual automobile insurance premium in Michigan include the national average for the United States?

We would be ___?__% confident that auto insurance premiums in Michigan are __?__ the national average.

3. Recently a news story reported that a paper was published investigating the bacterial infection of boiler chickens sold in the United States. The study design was based on purchasing 600 whole broiler chickens from grocery stores across the United States. The results indicated that 85% of the 600 chickens tested positive for the presence of harmful bacteria.

a) In words, state the population parameter of interest.

b) Construct a 98% confidence interval for the population parameter.

c) Interpret the 98% confidence intervals means in the context of the research question.

d) A spokesperson from the chicken lobby stated that “This study only sampled 600 chickens out of several billions of chickens killed each year. With such a small sample size, I don’t think consumers should be concerned about being exposed to bacteria by consuming chicken.” Is this valid statement? Explain.

Calculate the steady-state level of capital in each of the following economies. Unless other- wise stated, use the standard Solow model assumptions about national production, spend- ing/saving, and capital accumulation.

a) The contribution of physical capital to national production in advanced countries such as the United States may be overstated. Some empirical estimates suggest it is closer to 20%, rather than 33% (the one-third that pops up in the production function), which implies the appropriate (per effective worker) production function for the United States is y = k1/5. (5 points)

b) Research economists at the central bank for a particular country find that a 1% increase in income causes households to increase savings by more than 1%. To account for this, they adjust their growth model by using the assumption that household savings/investment (per effective worker) is given it = syt2. (5 points)

1.     Look at each of the cases below from the point of view of the balance of payments for the United States. Determine the subcategory of the current account or financial account that each transaction would be classified in, and state whether it would enter as a credit or debit.

a.    The U.S. government sells gold for dollars.

b.   A migrant worker in California sends $500 home to his village in Mexico.

c.    An American mutual fund manager uses the deposits of his fund investors to buy Brazilian telecommunication stocks.

d.   A Japanese firm in Tennessee buys car parts from a subsidiary in Malaysia.

e.    An American church donates five tons of rice to the Sudan to help with famine relief.

f.    An American retired couple flies from Seattle to Tokyo on Japan Airlines.

g.    The Mexican government sells pesos to the United States Treasury and buys dollars.

Garrison Appliances, Inc. is considering expanding its international presence. It sells 25% of all the toaster ovens sold in the United States but only 3% of the toaster ovens sold outside of the United States. The organization believes that it can sell more of its product if it has a production facility located overseas. Estimates concerning two possible locations, Mumbai and Bangalore, India follow: Possible Location Mumbai Bangalore Initial cash outlay $5,000,000 $2,800,000 Useful life 20 years 20 years Net cash inflows excluding depreciation $1,100,000 $860,000 The cost of capital 9% 9% Tax rate 40% 40% The Assignment: Part 1: Prepare a spreadsheet using Excel or a similar program in which you compute the following for each proposed location Accounting rate of return on investment Payback Net present value Internal rate of return

Globalization has pulled hundreds of millions of people out of poverty in China and India and other countries in Asia. Global equality appears to be increasing through the principle of “comparative advantage” as discussed in Chapters 10 and 20. How should the convergence of global incomes be weighed against the structural changes that globalization has required in the United States and other developed economies? Was the Trump administration justified in renegotiating the North American Free Trade Agreement (NAFTA) in the interests of the United States? Should the administration renegotiate trade deals with other countries such as China given the potential negative effects on incomes in those countries? Why or why not? Should workers who lose their jobs due to foreign imports be compensated for their lost incomes? Explain your reasoning utilizing the concepts introduced in Chapters 10, 20, and 21 of your digital text.(International Trade and Globalization/Protectionism)