ANSWER URGENTLY

Political change in Asia, for example, could result in an increase in the cost of labor. This could increase the manufacturing costs for an American sneaker company that is based in Malaysia, which would then result in an increase in the price charged for a pair of sneakers that an American consumer might purchase at their local mall.

Imports and Exports

A product that is sold to the global market is called anexport, and a product that is bought from the global market is animport. Imports and exports are accounted for in thecurrent accountsection in a country's balance of payments.

Global trade allows wealthy countries to use their resourcesfor example, labor, technology, orcapitalmore efficiently. Different countries are endowed with different assets and natural resources: land, labor, capital, and technology, etc. This allows some countries to produce the same good more efficientlyin other words, more quickly and at lower cost. Therefore, they may sell it more cheaply than other countries. If a country cannot efficiently produce an item, it can obtain it by trading with another country that can. This is known asspecializationin international trade.

For example, England and Portugal have historically both benefited by specializing and trading according to their comparative advantages.Portugal has plentiful vineyards and can make wine at a low cost, while England is able to more cheaply manufacture cloth given its pastures are full of sheep.Each country would eventually recognize these facts and stop attempting to make the product that was more costly to generate domestically in favor of engaging in trade. Indeed, over time, England stopped producing wine, and Portugal stopped manufacturing cloth. Both countries saw that it was to their advantage to stop their efforts at producing these items at home and, instead, to trade with each other in order to acquire them.

Comparative Advantage

These two countries realized that they could produce more by focusing on those products for which they have acomparative advantage. In such a case, the Portuguese would begin to produce only wine, and the English only cotton. Each country can now create specialized output of 20 units per year and trade equal proportions of both products. As such, each country now has access to both products at lower costs. We can see then that for both countries, theopportunity costof producing both products is greater than the cost of specializing.

Comparative advantage can contrast withabsolute advantage. Absolute advantage leads to unambiguous gains from specialization and trade only in cases wherein each producer has an absolute advantage in producing some good. If a producer lacked any absolute advantage, then they would never export anything. But we do see that countries without any clear absolute advantage do gain from trade because they have a comparative advantage.

According to the international trade theory, even if a country has an absolute advantage over another, it can still benefit from specialization.Political change in Asia, for example, could result in an increase in the cost of labor. This could increase the manufacturing costs for an American sneaker company that is based in Malaysia, which would then result in an increase in the price charged for a pair of sneakers that an American consumer might purchase at their local mall.

Imports and Exports

A product that is sold to the global market is called anexport, and a product that is bought from the global market is animport. Imports and exports are accounted for in thecurrent accountsection in a country's balance of payments.

Global trade allows wealthy countries to use their resourcesfor example, labor, technology, orcapitalmore efficiently. Different countries are endowed with different assets and natural resources: land, labor, capital, and technology, etc. This allows some countries to produce the same good more efficientlyin other words, more quickly and at lower cost. Therefore, they may sell it more cheaply than other countries. If a country cannot efficiently produce an item, it can obtain it by trading with another country that can. This is known asspecializationin international trade.

For example, England and Portugal have historically both benefited by specializing and trading according to their comparative advantages.Portugal has plentiful vineyards and can make wine at a low cost, while England is able to more cheaply manufacture cloth given its pastures are full of sheep.Each country would eventually recognize these facts and stop attempting to make the product that was more costly to generate domestically in favor of engaging in trade. Indeed, over time, England stopped producing wine, and Portugal stopped manufacturing cloth. Both countries saw that it was to their advantage to stop their efforts at producing these items at home and, instead, to trade with each other in order to acquire them.

Comparative Advantage

These two countries realized that they could produce more by focusing on those products for which they have acomparative advantage. In such a case, the Portuguese would begin to produce only wine, and the English only cotton. Each country can now create specialized output of 20 units per year and trade equal proportions of both products. As such, each country now has access to both products at lower costs. We can see then that for both countries, theopportunity costof producing both products is greater than the cost of specializing.

Comparative advantage can contrast withabsolute advantage. Absolute advantage leads to unambiguous gains from specialization and trade only in cases wherein each producer has an absolute advantage in producing some good. If a producer lacked any absolute advantage, then they would never export anything. But we do see that countries without any clear absolute advantage do gain from trade because they have a comparative advantage.

According to the international trade theory, even if a country has an absolute advantage over another, it can still benefit from specialization.

1. Assume that the economy is described by the following equations: C YD = 650 + 0.1* I = 400 + 0.1*Y 800i G = 200 P = 1 = 1800 s P M Y i P M d = 2 1000

i) Solve for equilibrium real output, the interest rate, C and I. Graph the IS and the LM relations and label the equilibrium. (10 points)

2. How would the increase in housing starts from last year to this year affect the equilibrium you just computed in part 1)? Assume that the increase in new houses is exogenous and worth $48 billion. Calculate the new equilibrium. Graph and explain. (10 points)

3. How if at all might the Federal Reserve react to the increase in housing starts in order to keep Y constant at the level of part 1)? Calculate and draw a graph. (10 points)

4. tarting from the situation in part 2), how could the government restore the equilibrium obtained in part 1) through fiscal policy operations (assuming that the Federal Reserve does not react at all)? Calculate. (10 points)

5. Which of the subsequent announcement is unreliable with Say's Law

6. Marginal Inclination to Munch is_____________

7. In explaining the level of unemployment____________, Keynes emphasized________________,-

8. Assume that the consumption function is of the form, C= 50+.8Y. If income is Rs 1000/- then consumption is,-

9. In the unpretentious Keynesian prototypical _________________l consumption is a function of_____________,

10. n the simple Keynesian model consumption is a function of,

11. n the simple Keynesian model consumption is a function of,

12. In simple Keynesian model, stability of equilibrium exists, if

13. Keynesian analysis is__________

14. The average propensity to consume__________ is measured by)__________

15. An increase in marginal propensity to consume will___________