Econ 370: Economics Assignment Solution - Grade One Essays

Econ 370: Economics Assignment Solution

1. The graph below depicts a large country which has opened up trade in cars with other countries. The free trade price in the world market is $8000. The large country imposes a tariff of $1000 per car.

What is the autarky equilibrium price of cars in this country? —————————

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If the world market price is $8000, what is:

Consumer demand at free trade price? ————

Domestic production at free trade price? ————–

How much is import at free trade price? —————–

As referred above, to satisfy the discontent domestic producers, government imposes a tariff of $1,000 on each imported car.

Price in the world market falls to $7800. As a result, Domestic consumers now face a supply curve Sw’+t at price $8800.

What is domestic demand after tariff? ——————

What is domestic production after tariff? ______________

How much is import after tariff? _______________

As a result of tariff:

Consumer surplus in the large country decreases by how much? (detailed computation must be shown) ————–

Producer surplus in the country increases by how much? (Detailed computation must be shown) ————–

What is government’s revenue after tariff? (areas are to be indicated and computations must be shown)

How much of this revenue is terms of trade effect? ————

How much of this revenue government collects from the domestic consumers?

How much is deadweight loss in this country? ———————–

Does the country achieve net national gain or loss? By how much?

——————— —————————————–

2. Use the 2018 BOP Account data for the US given below and answer the questions that follows. Show every step of your Computations

Table 1. U.S. International Transactions–2018
[Millions of dollars]
Line   2018 Line
  Current account    
1 Exports of goods and services and income receipts (credits) 3,735,684 1
2 Exports of goods and services 2,501,310 2
3 Goods 1,674,330 3
4 General merchandise 1,652,113 4
5 Foods, feeds, and beverages 133,176 5
6 Industrial supplies and materials 534,649 6
7 Capital goods except automotive 563,156 7
8 Automotive vehicles, parts, and engines 158,839 8
9 Consumer goods except food and automotive 205,471 9
10 Other general merchandise 56,821 10
11 Net exports of goods under merchanting 270 11
12 Nonmonetary gold 21,947 12
13 Services 826,980 13
14 Maintenance and repair services n.i.e. 30,968 14
15 Transport 92,852 15
16 Travel (for all purposes including education) ¹ 214,680 16
17 Insurance services 17,466 17
18 Financial services 112,015 18
19 Charges for the use of intellectual property n.i.e. 128,748 19
20 Telecommunications, computer, and information services 43,196 20
21 Other business services 165,821 21
22 Government goods and services n.i.e. 21,235 22
23 Primary income receipts 1,084,183 23
24 Investment income 1,077,515 24
25 Direct investment income 574,464 25
26 Portfolio investment income 411,171 26
27 Other investment income 91,247 27
28 Reserve asset income 632 28
29 Compensation of employees 6,668 29
30 Secondary income (current transfer) receipts ² 150,191 30
31 Imports of goods and services and income payments (debits) 4,226,662 31
32 Imports of goods and services 3,128,989 32
33 Goods 2,561,667 33
34 General merchandise 2,551,105 34
35 Foods, feeds, and beverages 148,364 35
36 Industrial supplies and materials 583,344 36
37 Capital goods except automotive 695,939 37
38 Automotive vehicles, parts, and engines 373,123 38
39 Consumer goods except food and automotive 649,096 39
40 Other general merchandise 101,237 40
41 Nonmonetary gold 10,562 41
42 Services 567,322 42
43 Maintenance and repair services n.i.e. 8,718 43
44 Transport 108,202 44
45 Travel (for all purposes including education) ¹ 144,463 45
46 Insurance services 42,485 46
47 Financial services 31,298 47
48 Charges for the use of intellectual property n.i.e. 56,117 48
49 Telecommunications, computer, and information services 41,190 49
50 Other business services 111,874 50
51 Government goods and services n.i.e. 22,975 51
52 Primary income payments 830,198 52
53 Investment income 810,618 53
54 Direct investment income 244,197 54
55 Portfolio investment income 471,795 55
56 Other investment income 94,626 56
57 Compensation of employees 19,580 57
58 Secondary income (current transfer) payments ² 267,475 58
  Capital account    
59 Capital transfer receipts and other credits 3,247 59
60 Capital transfer payments and other debits 12 60
     
Table 1. U.S. International Transactions–continues  
[Millions of dollars]  
Line   2018 Line
  Financial account    
61 Net U.S. acquisition of financial assets excluding financial    
  derivatives (net increase in assets / financial outflow (-)) 310,827 61
62 Direct investment assets -78,457 62
63 Equity -151,614 63
64 Debt instruments 73,157 64
65 Portfolio investment assets 334,033 65
66 Equity and investment fund shares 194,087 66
67 Debt securities 139,945 67
68 Short term 16,341 68
69 Long term 123,604 69
70 Other investment assets 50,262 70
71 Currency and deposits 71,792 71
72 Loans -22,423 72
73 Insurance technical reserves n.a. 73
74 Trade credit and advances 893 74
75 Reserve assets 4,989 75
76 Monetary gold 0 76
77 Special drawing rights 156 77
78 Reserve position in the International Monetary Fund 4,824 78
79 Other reserve assets 10 79
80 Currency and deposits (*) 80
81 Securities 10 81
82 Financial derivatives 0 82
83 Other claims 0 83
84 Net U.S. incurrence of liabilities excluding financial derivatives    
  (net increase in liabilities / financial inflow (+)) 735,583 84
85 Direct investment liabilities 258,392 85
86 Equity 357,164 86
87 Debt instruments -98,773 87
88 Portfolio investment liabilities 315,676 88
89 Equity and investment fund shares 142,396 89
90 Debt securities 173,280 90
91 Short term 28,099 91
92 Long term 145,181 92
93 Other investment liabilities 161,515 93
94 Currency and deposits 32,320 94
95 Loans 114,066 95
96 Insurance technical reserves n.a. 96
97 Trade credit and advances 15,129 97
98 Special drawing rights allocations 0 98
99 Financial derivatives other than reserves, net transactions ³ -20,721 99
  Statistical discrepancy    
100 Statistical discrepancy 42,266 100

 

  1. Compute US Current Account Balance for the year 2018. Explain whether the balance indicated a deficit or surplus for the year 2018.
  2. Compute the Capital Account Balance for US in the year 2018. Did the account reflect a deficit or a surplus?
  3. Compute US Financial Account Balance for the year 2018. Was the account in deficit or surplus?
  4. Compute Statistical Discrepancy for the 2018 BOP Account. Does your answer match with the number shown on the table? (Show how you arrive at your answer for Statistical Discrepancy).

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