Consider a Small Open Economy with Desired National Saving of S^d

question 78

Essay

Consider a small open economy with desired national saving of S^d = 20 + 200 r^w and desired investment of I^d = 30 - 200 r^w. Calculate national saving, investment, and the current account balance in equilibrium when the real world interest rate is
a. r^w = 0.025
b. r^w = 0.05
c. r^w = 0.0
d. Now suppose something causes desired national saving to increase by 10, so that it is now S^d = 30 + 200 r^w. Repeat parts a, b, and c.
e. Suppose, with desired national saving at its original level of S^d = 20 + 200 r^w, something causes desired investment to rise by 10, I^d = 40 - 200 r^w. Repeat parts a, b, and c.

Understand the calculation and significance of the minimum bid price in project and product pricing.

Grasp the concept of equivalent annual cost for evaluating projects over their lifecycle.

Calculate the present value of tax shields resulting from Capital Cost Allowance (CCA).

Understand the concept of cash flow recovery from net working capital at the end of a project.

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Definitions:

Operating Expenses

Operating expenses refer to the costs associated with the day-to-day functioning of a business, excluding direct production costs but including things like rent, utilities, and payroll.

Department Manager

A professional responsible for overseeing the operations, staff, and budget of a department within an organization.

Investment Center

A decentralized unit in which the manager has the responsibility and authority to make decisions that affect not only costs and revenues but also the fixed assets available to the center.

Authority

The power or right to make decisions, direct others, and enforce obedience within a particular scope.