Week 6 Economics Discussion

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Economics, Ch. 35: Financial Economics

Read pages 778-780, 783-797 of Economics.

Consider the following as you read:

  • What is the time value of money and how can compound interest be used to calculate the present value of any future amount of money?
  • How is the word "risk" used in financial economics and what is the difference between diversifiable and non-diversifiable risk?

  • Economics, Ch. 38: International Trade
  • Read pages 854-857 of Economics.

Consider the following as you read:

  • What is the validity of the most frequently presented arguments for protectionism?
  • What are the economic effects of tariffs and quotas?
  • Economics, Ch. 39: The Balance of Payments, Exchange Rates, and Trade Deficits

Read pages 880-888 of Economics.

Consider the following as you read:

  • What are the causes and consequences of recent U.S. trade deficits?
  • What is the balance sheet the United States uses to account for international payments made/paid and for international payments received?

Tutor Answer

DoctorDickens
School: Carnegie Mellon University

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Running head: WEEK 6 ECONOMICS DISCUSSION

Week 6 Economics Discussion
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WEEK 6 ECONOMICS DISCUSSION

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Time value of money is the concept that holds money due to its earning capacity, its availability
at the present time is worth more than the same sum to be received in the future. Compound interest
calculates the value of money that in the present time and depict the amount to which the
investment will grow in the future. In simple terms it determines the current worth of the money
to be received in the future. Risk is used in financial economics to measure the possibility of an
investor to lose money in the process of realizing the gains from the investment. In this regards,
diversifiable risk outlines the portion of risk that is related to random causes that can be done away
with through diversification. By contrast, non-diversifiable risk outlines the portion of risk that is
related to market factors such as political events, international incidents, inflation and war, which
cannot be eliminated through diversification.
The U.S. trade deficit is caused by the net inflow of capital from the rest of the world to the United
States. Being that there are relatively free and stable domestic markets in the U.S, it remains the
most popular destination for foreign investment. In this regard, the inflow of capital from the rest
of the world makes the United States to pay more for the imports than what they pay for exports.
The consequences of the trade deficit in the United States is are; first, it signals the rising
investment and domestic demand in the United States. Secondly, it has made the trade policy in
the United States to be largely immune.

Attached.

Running head: WEEK 6 ECONOMICS DISCUSSION

Week 6 Economics Discussion
Institutional affiliation
Course
Professor’s name
Date

1

WEEK 6 ECONOMICS DISCUSSION

2

Chapter 35
Time value of money is the concept that holds, money due to its earning capacity, its availability
at the present time is worth more than the same sum to be received in the ...

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Anonymous
Thanks for the help.

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