,solve the following
Consider a twoperiod model of a small open economy with a single good each period and no investment. Let preferences ofthe representative household be described by the utility function urc1,c21 = {C1 + pic: The parameter IE is known as the subjective discourrt factor. It measures the consumer's degree of impatience in the sense that the smaller ,3 is, the higher is the weight the consumer assigns to present consumption relative to future consumption. Assume that ,8 = 1!].1. The representative household has initial net foreign wealth of {1 + r0} EN] = 1, with r = :11, and is endowed with 01 = 5 units of goods in period 1 and 02 = ID units in period lThe world irrterest rate paid on assets held from period lto period 2, r*, equals 10% {r* = :11] and there is free international capital mobility. 1. Calculate the equilibrium levels of C1, C2, 1131, CA1. 2. Suppose now that the government imposes capital corrtrols that require that the country's net foreign asset position at the end of period 1 be nonnegative [Fl 2 ID]. Compute the equilibrium value of the domestic interest rate r1, C1, C2,TB]_, CA1. 3. Evaluate the effect of capital corrtrols on welfare. Specically, nd the level of utility under capital controls and compare it to the level of utility obtained under free capital mobility. Question 1: Problem solving {Ill Marks) The Production Costi'canister {$) and the Weekly Sales 1'v'olume (number of canisters) of a variety of olive oil were recorded in a sample of 6 oil trading companies (table below): 011 Tradin Corn . Inn-nun _lm Weekl SalesVolume canistersxl Ill-m!\" 1. Construct a simple regression model to predict the Weekly Sales Volume by Production Coscanister. (4 Marks) 2. Find the predicted Weekly Sales Volume on that olive oil variety in an oil trading companyr where the Production Cost is $ SSI'canister. {I Mark) 3. Compute r2 and r forthis mode}. and interpret their values in this case. (3.5 Marina} 4. Calculate the prediction error for the "i'v'eeltljiF Sales Volume value of 600 canisters based on the regression model constructed previously. (1.5 Marks) ?34 Material cost variances, use of variances for performance evaluation. Katharine Stanley is the owner of Better Bikes, a company that produces high quality crosscountry bicycles. Better Bikes participates in a supply chain that consists of suppliers, manufacturers, distributors, and elite bicycle shops. For several years Better Bikes has purchased titanium from suppliers in the supply chain. Better Bikes uses titanium for the bicycle frames because it is stronger and lighter than other metals and therefore increases the quality of the bicycle. Earlier this year, Better Bikes hired Michael Scott, a recent graduate from State University, as purchasing manager. Michael believed that he could reduce costs if he purchased titanium from an online marketplace at a lower price. Catherine is a U.S. citizen who is employed by DSC, Inc., a global company. Beginning on August 1, 2018, Catherine began working in Augsburg, Germany. She worked for 153 days of 2018. She worked there until March 31, 2019, when she transferred to Kamnik, Slovenia. She worked in Kamnik for the remainder of 2019. Her salary for the first seven months of 2018 was $225,000, and it was earned in the United States. Her salary for the remainder of 2018 was $165,000, and it was earned in Augsburg. Catherine's 2019 salary from DSC was $425,000, with part being earned in Augsburg and part being earned in Kamnik. Assume the 2019 indexed statutory amount is the same as the 2018 indexed amount. Assume a 365-day year. When required, round any fractions out to four decimal places. Round final answers to the nearest dollar. a. Catherine may exclude S __-_ from her gross income for 2018. b. Catherine may exclude $ from her gross income for 2019
