# 代写辅导接单-ECOS3029: -ecos3029代写-Assignment 1

ECOS3029: Assignment 1. Marked out of 70. Answer all parts of all questions. Please

provide supporting details of your calculations.

1) [9 marks] National Accounts Exercise. Suppose that the value of national account

aggregates in China for a year are:

Exports of goods and services: ¥250;

Imports of goods and services: ¥160;

Private consumption expenditure: ¥300;

Government consumption expenditure: ¥100;

Government tax revenues: ¥150;

Investment: ¥200;

Income received from foreign investments: ¥50;

Income paid to foreign investors: ¥50.

a) [3 marks] If the above list of transactions is complete, what is the Trade

Balance for China as a % of Chinese Gross National Income (GNI), correct to

at least 1 decimal place?

b) [3 marks] What is the Current Account Balance for China as a % of Chinese

GNI, correct to at least 1 decimal place?

c) [3 marks] What is the value of total savings in the economy?

2） [25 marks] Intertemporal Model. Assume that a small open economy runs for 2

periods and has production, investment, and a representative consumer with:

= ln(1) + ln⁡(2)

• Production function:

=

0.7⁡where the initial capital stock is 1 = 200

• Capital Stock in Period 2:

2 = 1 + 1

, where 1 is period‐1 investment

=0.15.

• (1+)=1.

• Initial Net International Investment Position: 1 = 0.

a. [3 marks] Write down the maximization problem for the

representative consumer

b. [8 marks] Solve for the optimal investment level 1 for the economy

in period 1.

c. [2 marks] What is the optimal investment level 2 for the economy in

period 2?

d. [9 marks] Solve for optimal consumption levels for the economy in

both periods.

e. [3 marks] What is the current account balance of the economy in

Period 1? What are total savings in the economy in Period 1?

3) [18 marks] Sudden Stops and Current Account Reversals. Consider the data for a

country in the table below. All parts to this question are worth 3 marks each.

a. Do you think it is optimal for this country to be running current account deficits

b. What features of this data suggest that there is an increased likelihood of this

country experiencing a “sudden stop” of capital inflows and a current account

c. What features of this data suggest a low likelihood of a “sudden stop” of

d. If the country were to experience a current account reversal, do any features

of the data suggest that the economic growth impact would be less substantial

e. If the country were to experience a current account reversal, do any features

of the data suggest that the economic growth impact would be more

substantial than normally occurs during such a reversal (briefly explain your

f. Is there any other data you would like to observe to be able to better assess

the likelihood of a sudden stop of capital inflows and a current account

Current

Account

Balance

Investment

Productivity

Index

Imports

Exports

Exchange Rate

(% of

GDP)

(% of GDP)

(2009=100)

(% of

GDP)

(% of

GDP)

(local currency

units per USD)

2009

‐16.2

37.2

100.0

122

107

2.44

2010

‐14.0

34.7

108.6

127

118

2.44

2011

‐15.6

37.5

113.3

164

149

2.44

2012

‐13.4

34.9

116.1

146

137

2.44

2013

‐12.0

35.0

123.1

159

149

2.44

2014

‐10.5

33.2

129.7

169

163

2.44

2015

‐9.0

34.6

138.1

170

165

2.44

2016

‐10.9

35.6

149.4

190

185

2.44

2017

‐13.1

39.5

162.4

209

202

2.44

2018

‐11.1

42.1

171.5

203

198

2.44

2019

‐8.9

45.8

175.8

187

185

2.44

4) [19 marks] Exchange Rates. Report answers correct to at least 3 decimal places.

a. [2 marks] If the spot exchange rate /=0.15, then what is the spot

exchange rate /?

b. [2 marks] If the spot exchange rate /=1.05, and the spot exchange

rate / = 1.25, what is the spot exchange rate /?

c. [2 marks] If the spot exchange rate / = 4.75, and the spot exchange

rate /=0.75, what is the spot exchange rate /?

d. [4 marks] Assume that you are an investor with 1,000 USD in an account and

observe the following spot exchange rates: / =0.75,

/=0.8583, / =1.1452. Assuming that there are no

transaction costs, what foreign exchange trading/investment strategy would

e. [2 marks] Assume that (i) the one‐year forward exchange rate

/ =1.0505 (ii) the current spot exchange rate / =1.0859;

and (iii) the one‐year interest rate for EUR is ∗ =9.23%. What must one‐year

CHF interest rates be for Covered Interest Parity (CIP) to hold?

f. [3 marks] The current value of the spot exchange rate /=1.05. If the

Canadian (CAD) inflation rate for the coming year will be 4% while the

Australian inflation rate will be 2%, what value of the exchange rate

/ 1 year from now would maintain Relative PPP?

g. [3 marks] Assume that consumers consume only 2 items: Rent; Food. In

Germany, rent for 1 year is EUR 15,000 and food for 1 year is EUR 7,500. In

Australia, rent for 1 year is AUD 20,000 and food for 1 year is AUD 7,500. If

the spot exchange rate is / =1.616, what is the real exchange rate

between Australia and Germany (treat Australia as the domestic country)?

At what value of the nominal exchange rate / would Absolute PPP

hold?

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