1) Country Beta and country Alpha both produce liters of wine and meters of cloth.

• In country Alpha each worker in an hour can produce either 6 liters of wine of 24 meters of cloth.
• In country Beta each worker in an hour can produce either 10 liters of wine or 50 meters of cloth.
• Each country has constant opportunity cost of production and each has 100 hours of labor available.

Initially the two countries do not trade.

• Country Alpha allocates 50 hours of labor to wine production and 50 hours of labor to cloth production.
• Country Beta allocates 25 hours of labor to wine production and 75 hours of labor to cloth production.

The two countries decide to completely specialize and then engage in trade.

• With specialization Country Alpha will produce liters of wine and meters of cloth.
• With specialization Country Beta will produce liters of wine and meters of cloth.

The two countries decide to trade 276 liters of wine in exchange for 1,242 meters of cloth.

Compare the amount of each good consumed in each country before trade to the amount consumed after trade.

After specialization and exchange:

• Country Beta is able to consume more liters of wine and more meters of cloth than it could before trade.
• Country Alpha is able to consume more liters of wine and more meters of cloth after specialization and exchange than it could before specialization and exchange.

Enter whole number in each blank.

2) Assume we start year 1 with a total government debt of $20 million. What happens at the end of each year?

In year 1 the government spends $425 million and collects $365 million in taxes.

• Public saving in year 1 is equal to $ million.
• The government debt is equal to $ million.

In year 2 the government spends $400 million and collects $420 million in taxes.

• Public saving in year 2 is equal to $ million.
• The government debt is now equal to $ million.

3)The average wage was $12 in 2007 and was $22 in 2017. The CPI was 175 in 2007 and 250 in 2017.

The percentage change in the real wage was %.

Round to the nearest whole number.

4) The bank has: $3,240 in reserves; $36,000 in deposits; $28,760 in loans; and $4,000 in government issued bonds.

If the bank is holding no excess reserves, what is the required reserve ratio? %

Consider the following transactions:

• People deposit $2,000
• People use their debit cards at Target for a total of $400
• The bank sells a $600 government bond

After all of the transactions are entered on the balance sheet, and before any new loans are made, what is the value of:

Required reserves

Excess reserves

Enter whole numbers.