1-Absolute Convergence Hypothesis Scenario: Based on the absolute convergence theory, consider the long-term economic outcomes for Iran...
Question:
1-Absolute Convergence Hypothesis Scenario: Based on the absolute convergence theory, consider the long-term economic outcomes for Iran and Switzerland, given their current GDP per capita values are $5,000 and $30,000, respectively. Specifically, how will the gap in GDP per capita between these two countries evolve in the long run under this theory?
2-Capital Account and Current Account Relationship: If a country has a negative current account balance, what condition must be met by its capital account to maintain overall balance of payments equilibrium? Explain the interrelationship between the capital account and the current account in this context.
3-Bond Valuation with Different Discount Rates: Consider a three-year bond with a face value of $1,000 and an annual coupon rate of 5% (coupons are paid annually and at maturity, resulting in three total payments). Calculate the value of this bond from your perspective as a potential buyer, using two different discount rates: 10% and 5%. How does the change in the discount rate affect the bond's valuation?
4-Fisher Effect and Interest Rate Adjustments: With the current inflation rate at 5% and the nominal interest rate at 10%, predict the adjustments to the nominal interest rate that would occur based on the Fisher effect if the inflation rate decreases to 2%, assuming all other factors remain constant.
5-Quantity Theory of Money and Price Level Changes: According to the Quantity Theory of Money, what is the expected impact on the price level if the quantity of money in an economy increases by 10%, while the velocity of money and the level of production remain unchanged?
Macroeconomics Principles Applications And Tools
ISBN: 9780134089034
7th Edition
Authors: Arthur O Sullivan, Steven M. Sheffrin, Stephen J. Perez