Q1: In a Small open economy, consumption is equal to

C=B(Y-T). Because of the Covid pandemic the marginal propensity to consume B goes from 0.75 to 0.5, while disposable income stays equal to 10,000 dollars. All other things equal, what is the change in the trade balance?

A: Not enough information to answer this questions

B: Trade balance decreases by 2,500 dollars

C: Trade balance increases by 5,000 dollars

D: Trade balance increases by 2,500 dollars

Q2: Ali and Barbara have 100 dollars, Ali makes an offer on how to split the 100 dollars. If Barbara agrees, they get to keep their share of the 100 dollars. If not the 100 dollars are destroyed. Who has the most bargaining power.

A: None of them. The 100 dollars will be destroyed anyway.

B: Not enough information

C: All

D: Barbara