Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Click to see additional instructions Canada introduces a new economic plan that includes expanded imports and exports. The model indicates that in the next year
Click to see additional instructions Canada introduces a new economic plan that includes expanded imports and exports. The model indicates that in the next year exports will be normally distributed with a mean of 100 and a variance of 900 (in billions of dollars). In addition, imports are expected to be normally distributed with a mean of 125 and a variance of 784 in the same units. The correlation between exports and imports is expected to be +0.70. Define the trade balance as exports minus imports. The linear combination of normal random variables is Normal. The trade balance W=XY, where X= exports and Y=imports, is a linear combination of 2 Normal variables. Therefore, to find probabilities about the trade balance, we need to create a Z score, where Z=(W - mean of W)/( standard deviation of W). Use the linear combination formulas to find the mean and standard devaition of W. a. The mean of W is W=aX+bY= (Include negative sign) b. Variance of the trade balance W is c. The probability that the trade balance W is greater than 0 is % NOTE: Write your answer as a percent like 8.4, not .084
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started