International Microeconomics

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Financial Aspects of

International Trade


international Macroeconomics


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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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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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