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F07ex3464_intertemporal

F07ex3464_intertemporal - You are not allowed to consult...

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You are not allowed to consult any notes or books. You have to write your answers in the blue book that the persons proctoring the exam give you. Your answers should reflect only your knowledge. Attempting to consult with others or to look at someone else’s work constitutes academic misconduct. Please return this page with your blue book. Name: ........................................................... Section (number or time): ......................... Econ 464 M. Muniagurria Fall 2007 Exam 3 (80 pts) (I) Intertemporal Trade Consider the model of intertemporal trade developed in class. Assume there are two countries (call them “Now” and “Then”) with nice PPF frontiers between present and future consumption good (corn) . “Now” has a comparative advantage in the production of time 0 corn and “Then” has a comparative advantage in the production of time 1 corn. If a country borrows at time 0 from the other it will do so by issuing an IOU in exchange for the corn. If instead a country lends time 0 corn to the other, it will receive in exchange an IOU issued by the other country.
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