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Given the information below, determine (a) if you would pay or earn the points and (b) what the forward rate would be. Currency Spot Interest Rate USD 5,00% GBP 1.6 GBP/USD 4.50 % EUR 0.9900 EUR/USD 5.50% JPY 120.00 USD/JPY 4.75 % 1. You want to buy Sterling forward against the dollar. The forward points are 0.0542. 2. You want to sell Euro forward against the dollar. The forward points are 0.0756. 3. You want to buy Yen forward against the dollar. The forward points are 1.05.2. (5 points) The previous question illustrates the core of the economics approach to environmental problems; i.e., that unregulated markets will produce too much of the good associated with a negative external effect. In these types of situations there are several actions that could be taken to solve the problem, depending on the context. Discuss the various actions that could be undertaken and when they are appropriate. 5 3. (5 points) When environmental problems started to be taken serious by many coun- tries, and specialized government environmental protection agencies (EPAs) were set up, the initial approach was to try to solve the problem by direct regulation. In practice this meant that the EPA introduces different types of environmental standards. (a) If the environmental problem is associated with emissions into the air, because a certain type of material input is used in the production process which leads to such (damaging) emissions, the natural thing to do for the EPA is to force firms to reduce their emissions. By defining a so called input-standard the EPA regulates the amount of emission per unit of input. But this may not be the best regulation to use. Discuss what other type of standard that the EPA can use and why it may be better.3b. Assuming convex preferences. demonstrate graphically and explain why offer curves are assumed to rise With \"5930': 1'0 the "HBO\" SKIS d then explain why offer WIVES eventually bend backtoward the import axis. (15 min) 4. Assume we have a two nation (-3!le and 5V0] and a two good (it and 1") world. Chit) and SVC both have linear production possibility frontiers. For EMU: Y = 1n - 5K and for SUB: 'r' = a - 21f. Use one graph for the following: a. Graph both countries' production possibility curves (put X on the horizontal axis). {2 min) b. What numerically is CMU's and SVC's DTOT? (1 min) 0. Assume both CMU and SVC have identical tastes. Adding only one indifference curve to the graph. showthe autarky production and consumption points (assume both X and 'i' are consumed]. li'ilhat is the rule to maximize social welfare? (3 min] d. Now assume we have free trade between CMU and SVC. I. The W'l'o'l' will be somendtere between what numerical veiues'? ['1 min) ii. Adding only one WTOT line and one more indifference curve in your graph. show the alter trade consumption and production points for CMU and 5V6. (3 min] iii. What is the rule to maximize social welfare? (1 min) iv. What is the rule to maximize the value of production? [1 min) v. Show the amount of export and import for CMU and SUD. (2 min} vi. What perimeters dene thetrade triangles for CMU and SW}? [2 min) us. Now ckaw a new graph and based on Chili's PPF (Y = 10 5X]. show the gains from exchange and trade. {4 min) 5. Given that CMU's PPF is linear and the information from question 4. derive the offer curve. Be sure to label the axes and all relevant curves (5 min} International Trade and Development Name. Camegle Mellon University October. 1996 Questions 1 and 2 account for 40 minutes of the test or sot. of your grade. 1. Evaluate the Clinton administration's trade negotiations with Japan. Wl'iat are the key points of disagreement? What resolutions have been proposed? What is the current status of the negotiations? Who are the key players in resolving trade disputes? Is there momentum toward free trade? Ate trade policies consistent with the WT!) agreement? 2 What is Clinton's global trade policy? Include in your assay a discussion of the concepts of 'gececonomic warfare.' political and economic hegemony. and the economic and political ramifications of US. trade poiicies. 3. Assume we have two countries (CMU and SVC} with different PPFs which exhibit increasing relative costs. CMU has an absolute advantage in the production ofbolh goods it and 'i'. but Slit: can still inuence market prices when they trade. CMU residents strongly prefer good )i and SVC have a strong preference for good '1'. The social indifference curves are convex. For questions that ask you to describe points. showthern both on your graph and provide a description. [24 minutes) a. Using only one graph, draw CMU and SVG's production possibility curves. b. Show their autarlty consumption and production points for both CMU and Sift} (show the appropriate indifference curves for CMU and 5V0}. c. Show the DTD'I" tine tor both counties. Who has the comparative advantage in good Y? How do you know your answer is correct? d. Draw a possible W'I'OT line for both CMU and SVC. e. Show the production and commotion points when free trade is allowed tor both countries. f. Who will export I? g. What are the trade triangles for CM!) and SVC? h. Is it possible forthe free trade state of SW: to have a higher value of output {GDP} than the autarlry state of Chi\"? Draw a graph to demonstrate. 1. Is it possible forthefree tradestate of 5130 to have a highervalue ofoutput thanthe free trade state of CMU? Explain. 1'. Suppose CMU prevents trade from changing its production point but allows its citizens to to trade at the WTOT. Is it possible for the residents of Sit-3 to have a higher value of output than the residents of CMU with free trade? Explain and show a graph. 4. Draw (3th and SVC's offer curves. (16 minions] a. Show the WTOT eqmllbrilsn line and suppose that it is equal to 4 and that it is stable. b. Suppose CMU realizes a technical innovation that allows it to supply more of its export good into the market place for any given amount of the import good. Shiftthe offer curve 1. Discuss some of the underpinning traits held by entrepreneurs. 2. Consider the main attributes of the entrepreneur given by the three m economic theorists of the entrepreneurial tradition, are they applicable today? 3. Are entrepreneurs homogeneous in terms of their types and motivation Discuss. 4. To what extent is entrepreneurship a new phenomenon? 5. Why do entrepreneurs decide to undertake the risk of going it alone? 6. To what extent has academia resolved questions surround entrepreneurship?1. According to the video, Costa Rica has increased the total economic value of its forests through a botanical medicines. b. fruit and handicraft production. c. tourism. d. all of the above are correct e. none of the above is correct 2. Which of the following is not a part of Costa Rica's policies to contribute to the reduction in global warming? a. adopting developed-country emission standards b. carbon sequestration c. clearing forest land d. replanting mangrove forest e, none of the above is the correct answer 3. In Loma Alta, Ecuador, researchers convinced local community members that deforestation had a increased soil erosion. b. reduced cattle production . c. reduced the water supply. d. both a and b are correct. e. both a and c are correct. 4. Carbon dioxide emissions from fossil fuels a comprise more than one-half of carbon dioxide in the air and water. b. have increased substantially in the last 200 years. c. have reduced the temperature of the earth in the last few decades. d. all of the above are correct e. both a and b are correct 5. According to Mahwish Aqeel, a a species subject to mass extinction can recover in a generation. b. biodiversity is now at its lowest level since the Mesozoic era. c. the exact number of species on earth is 10,000. d. the mass extinction of species is at an unprecedented low level. e. none of the answers above is correct 6. Which of the following group of countries now emits the majority of greenhouse gases? a China and India b. Latin America c. tropical countries d. US, Canada, Europe, the former Soviet Union, and Japan e. none of the groups above emits a majority of greenhouse gases 7. According to economists, which of the following areas is expected to be most vulnerable to a continuation of global warming and related climate changes throughout the 21" century? a. Canada b. Europe c. Russia d. the South e the US 8. Most scientists think that the major contributors to the increase in global atmospheric temperature in the last seventy years have been a factories and forests. b. factories and pets. c. factories and vehicles. d forests and pets. e. forests and vehicles. 9. Why do many economists advocate substituting a tax on fossil fuels for income taxes in the United States?ME7. With the same data, verify how well (or how badly) the value of an n-year annuity ( = 1,....5) is approximated when one uses the five-year yield at par of a bullet bond rather than the complete term structure of spot returns