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Financial Aspects of
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HOMEWORK 3:EC 5660: DUE IN CLASS: FEB 28 2019 All
Chapter 6:
1. if the market clearing is CAU SA +CACHIN A = 0 with CA representing current account,
show that C1U SA + C1CHIN A = (3/2) ∗ Q, where C1 represents the consumption in period 1,
and Q is endowment. Note that China has Q/2 endowment in period 1, whereas USA has
Q.
2. Given the market clearing equation in question 1 above, show that market clearing
interest rate is 33%.
3. What is the USA and Chinese period 2 optimal consumption in terms of only endowment Q?Hint use question 2 answer.
1
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Running head: International microeconomics
International microeconomics
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Name course
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International microeconomics
Question one
Market clearance= CA for USA +CA for CHINA =0 where CA= current account
C1 = Endowment + Market clearance where C1 = consumption in p...
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