Reference no: EM13983318

Consumer and Producer Surplus in International Markets

1) The US is a big country in the international market of wheat and a "net exporter." Finland is a "net importer" of wheat. Analyze the welfare effect of and export subsidy by the US government on the economies of the US and Finland. What happens with the "terms of trade"?

2) The US is a small country in the market of dulce de leche and a "net importer." Argentina is a "net exporter" and a big country in that market. Analyze the welfare effect of an export quota by the Argentinian government on the economies of the US and Argentina. What happens with the "term of trade"?
Balance of Payments Accounting Register the following transactions in the Balance of Payments of the US:

3) An American company buys 1 million dollars in raw material from a Chinese company and pays with money it holds in a US bank.

4) An American company buys 1 million dollars in raw material from a Chinese company and pays with bonds it holds in a Swiss bank.

5) An American company buys 1 million dollars in raw material from a Chinese company and in exchange it sells 1 million dollars in machines to the Chinese company.

6) A worker of Nicaraguan nationality that lives in Los Angeles, California, sends $20,000 US dollars to his family in Nicaragua.

7) An American worker that lives and works in Spain pays for his son's school €10,000 in Spain. His son is also American.

8) An American worker that lives and works in Spain pays for his son's school $20,000 in the US. His son is also American.

9) The US government issues $5 billions in government bonds: US banks buy $3 billions and foreign banks buy $2 billions. Foreign banks pay with funds hold at US banks while US banks pay with funds holds in Swiss banks. The US government, after receiving the money abroad, brings the funds back to the US.
Real and Financial Flows matrix

10) Register all the previous transaction (3 to 9) in the Real and Financial Flows matrix 11) Assume that the US government implements at the same time an import quota and an export subsidy in markets in which the US is considered a "small country" (therefore international prices do not change). The subsidies are paid by issuing bonds that are bought by the FED.

Assume that before the policies are implemented, the current account was in equilibrium and all foreign transactions are made in US dollars.

12) Register the previous exercise assuming you are a "foreign" country and that the only institution in that foreign country holding dollars is the Central Bank. Initially, the foreign country current account is also in equilibrium.

13) Assume the US is a "net importer" of OIL and that all foreign transaction are made in dollars. Register the effect of an increase in OIL prices. Assume that the private sector and government sector both use OIL and that the government does not change the tax structure but issues debt that sells to the FED to pay any increase in expenditures.

14) Register the previous exercise assuming that OIL transactions are made in Euros and that the FED does not hold Euros. Which situation do you think would have a higher impact on the US economic growth? Why?