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Natasha_Volkova [10]
3 years ago
7

Consider a two-period endowment economy populated by identical house- holds with preferences defined over consumption in period

1, C1 and con- sumption in period 2, C2, and described by the utility function In C1 + E In C2, where C, denotes consumption in period 1, C2 denotes consumption in pe- riod 2, and E denotes the expected value operator. Each period, the econ- omy receives an endowment of 10 units of food. Households start period 1 carrying no assets or debts from the past (B* = 0). Financial markets are incomplete. There is a single internationally traded bond that pays the interest rate p* = 0. 1. Compute consumption, the trade balance, the current account, and national saving in period 1. 2. Assume now that the endowment in period 1 continues to be 10, but that the economy is prone to severe natural disasters in period 2. Sup- pose that these negative events are very rare, but have catastrophic effects on the country's output. Specifically, assume that with proba- bility 0.01 the economy suffers an earthquake in period 2 that causes the endowment to drop by 90 percent with respect to period 1. With International Macroeconomics, Chapter 6, July 31, 2019 223 probability 0.99, the endowment in period 2 is 111/11. What is the expected endowment in period 2? How does it compare to that of period 1? 3. What percent of period-1 endowment will the country export? Com- pare this answer to what happens under certainty and provide intu- ition. 4. Suppose that the probability of the catastrophic event increases to 0.02, all other things equal. Compute the mean and standard deviation of the endowment in period 2. Is the change in probability mean preserving? 5. Calculate the equilibrium levels of consumption and the trade balance in period 1. 6. Compare your results with those pertaining to the case of 0.01 prob- ability for the catastrophic event. Provide interpretation.

Business
1 answer:
anzhelika [568]3 years ago
4 0

Answer:

Explanation:

See attachment below

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QUESTION 1 Buchanan Corp. forecasts the following payoffs from a project: Outcome Probability of Outcome Assumptions $ 1,100 25
Lorico [155]

Answer:

$2,700

Explanation:

Calculation for the expected value of the outcomes

Using this formula

Expected value=respective outcome*Respective probability

Let plug in the formula

Expected value=(0.25*1100)+(0.55*2300)+(0.20*5800)

Expected value=$275+$1,265+$1,160

Expected value=$2,700

Therefore the expected value of the outcomes will be $2,700

5 0
3 years ago
an important aspect of any type of bankruptcy proceeding is the protection that the debtor has after filing for bankruptcy. the
Mariana [72]

Liquidation or the most frequent type of bankruptcy for individuals is straight bankruptcy. Your assets—anything you own with monetary value—are liquidated (sold) under the supervision of a court-appointed trustee in order to satisfy your debts.

<h3>How can bankruptcy be avoided?</h3>

preserving a positive cash flow, choosing a change in management, basing decisions on a business strategy, maintaining correct financial records, and maintaining excellent relations with creditors.

<h3>Which two primary categories of bankruptcy are there?</h3>

There are two distinct categories of bankruptcy cases out of these five types: 1) Straight/Liquidation, 2) Reorganization—the latter requires the designation of classes of claims and interests in the reorganization plan.

To know more about the Straight bankruptcy visit :-

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8 0
1 year ago
The permanent income hypothesis suggests that consumer:
zimovet [89]

Answer: d. spending depends on income people expect over the long term, rather than on current income.

Explanation:

The permanent income hypothesis states that people will spend money at a level equal to their permanent income which is their expected long-term average income.

The consumption function states that consumption is equal to autonomous consumption and consumption is dependent on disposable income.

The savings function shows the relationship between savings and income.

5 0
3 years ago
Employers are required to post notices to all employees advising them of their rights under the laws EEOC enforces and their rig
-Dominant- [34]

Answer:

True

Explanation:

EEOC Laws are Equal Employment Opportunity Laws

It basically aims to provide equal rights to each and every employee, irrespective of the language used by them, their place of birth, and many other factors like that.

It provides for special notices for employees with severe disability, as that the notice should be presented and accessible to employees with visual disability, or any other disability.

Therefore, it requires and mandates the responsibility for all employers towards their employees, towards communicating their rights.

Thus, statement is True.

4 0
3 years ago
Tanner-UNF Corporation acquired as a long-term investment $260 million of 6.0% bonds, dated July 1, on July 1, 2021. Company man
REY [17]

Answer:

1. Dr Investment in bonds $260 million

Cr Discount on bond investment $40 million

Cr Cash $220 million

2. Dr Cash $7.8 million

Dr Discount on bond investment $2.1 million

Cr Interest revenue $9.9million

3. $222.1million

4. Dr Cash $210 million

Dr Discount on Bonds investment $37.9million

Dr Loss on sale of bonds $12.1 million

Cr Investment in bonds $260 million

Explanation:

1. & 2. Preparatiin of the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the effective (market) rate.

1. Dr Investment in bonds $260 million

Cr Discount on bond investment $40 million

Cr Cash $220 million

(Being to record the purchase of investment )

2. Dr Cash $7.8 million

[(6%*$260)* 6 ÷ 12]

Dr Discount on bond investment $2.1 million

($9.9million-$7.8 million)

Cr Interest revenue $9.9million

[(9%*$220)* 6 ÷ 12]

(Being to record interest on bonds )

3. Calculation for what amount will Tanner-UNF report its investment in the December 31, 2021, balance sheet

Bond investment $260 million

Less Discount on bond investment ($37.9million)

($40 million - $2.1 million)

Investment cost $222.1million

Therefore the amount that Tanner-UNF will report its investment in the December 31, 2021, balance sheet is $222.1million

4. Preparation of the journal entry to record the sale.

Dr Cash $210 million

Dr Discount on Bonds investment $37.9million

($40 million - $2.1 million)

Dr Loss on sale of bonds $12.1 million

[260 million-($210 million+$37.9million)]

Cr Investment in bonds $260 million

(Being to record sale of bonds )

3 0
3 years ago
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