Consider Figure 21.1. What is the size of each of the following? (Each answer should be a number.)

a. World product without international lending.

b. World product with free international lending.

c. World product with Japan’s tax of 2 percent on its foreign lending.

What does the difference between your answers to parts a and b tell us? What does the difference between your answers to parts b and c tell us?

Data From  Figure 21.1

Transcribed Image Text:

FIGURE 21.1 Gains and Losses from Well-Behaved International Lending Percent per year (for rates of return, and MPK) MPK America f e a Percent per year 8 00 6 54 4 2 R g h MPK Japan 6,000 10,000 4,200 4,800 K = Capital in Japan KA = Capital in America = -W, Japan's wealth - World capital World wealth. WAL