Bundle: Principles of Microeconomics, 7th + LMS Integrated Aplia, 1 term Printed Access Card
7th Edition
ISBN: 9781305242463
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 18, Problem 8PA
Subpart (a):
To determine
Impact of trade in the perfect competition .
Subpart (b):
To determine
Impact of trade in the perfect competition.
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Q. 4
The Services sector has been steadily rising in relative importance in GDP of the United States, as well as elsewhere around the world. Since "services" have been identified as "non-tradable" (e.g., it is difficult to export haircuts), it may be argued that this trend will likely slow the rapid growth in international trade. Discuss.
Q1. Suppose that Brazil initially has a higher capital rental rate (r) than the United
States.
a. What would be the direction of foreign direct investment (FDI)?
b. Use a world-capital-market graph to show the effects of FDI on the two countries'
rental rates of capital, GDP, and return to labor owners.
c. Identify the net change in world output in the above graph.
d. How would the wage rate and the rental rate of capital in the recipient country be
affected in the long run?
e. Discussion: what other effects could FDI cause in the recipient and source countries
that are not captured in the model?
Three students have each saved $1,000. Each has an investment opportunity in which he or she can invest up to $2,000. Here are the rates of return
on the students' investment projects:
Return
Student
(Percent)
Antonio
4
Dmitri
Frances
15
Assume borrowing and lending is prohibited, so each student uses only personal saving to finance his or her own investment project.
Complete the following table with how much each student will have a year later when the project pays its return.
Money a Year Later
Student
(Dollars)
Antonio
Dmitri
Frances
Chapter 18 Solutions
Bundle: Principles of Microeconomics, 7th + LMS Integrated Aplia, 1 term Printed Access Card
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