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# Assignment 1 ECN 600 Assignment- Due February 6, 2022 at 11:59 PM —————————————————————————————————————————— Question 1 (30 marks) Download GDP data and real gross domestic investment from Statistics...

Assignment 1
ECN 600 Assignment- Due Fe
uary 6, 2022 at 11:59 PM
——————————————————————————————————————————
Question 1 (30 marks)
period 1997 to most recent available data. Compute and graph investment as a percentage
of GDP for each year. Comment on what happened to investment over that period.
Question 2 (30 marks)
If Ricardian equivalence would hold, government debt would be i
elevant. In the theoretical
model analyzed in class, Ricardian equivalence theorem holds under strong assumptions
which do not apply to real world.
Download quarterly general government debt data (Table: XXXXXXXXXX, first row in the
table) from 1997 to 2019 from Statistics Canada webpage.
a) Graph the data against time. (10 marks)
) Compute the debt as a percentage of GDP (use the GDP data from Question 1). Graph
this variable against time. (10 marks)
c) How debt to GDP ratio has evolved in Canada over this period? (5 marks)
d) In your opinion, are these findings problematic? (5 marks)
Question XXXXXXXXXXmarks)
Consider two consumers A and B both follow the two-period model of consumption. A earns
\$100 in the first period and \$100 in the second period. B earns nothing in the first period
and \$210 in the second period. Both of them can bo
ow or lend at the interest rate r.
a. You observe both A and B consuming \$100 in the first period and \$100 in the second
period. What is the interest rate r?
. Suppose that the interest rate increases. What will happen to A’s consumption in the first
period? Is A better off or worse off than before the interest rate rise?
c. What will happen to B’s consumption in the first period when the interest rate increases?
Is B better off or worse off than before the interest rate increase?
Question XXXXXXXXXXmarks)
In lecture we consider a case in which the consumer can save or bo
ow at an interest rate
of r and for the case in which the consumer can save at this rate but cannot bo
ow at all.
Consider now the intermediate case in which the consumer can save at rate and bo
ow
at rate , where .
a) What is the consumer’s budget constraint in the case in which she consumes more than
her income in period one? Answer in the form of an equation.
) What is the consumer’s budget constraint in the case in which she consumes more
than her income in period one? Answer in the form of an equation.
c) On a single graph, show the two budget constraints from parts (a) and (b). Shade the
area that represents the combination of first-period and second-period consumption the
consumer can choose.
d) Now add to your graph the consumer’s indifference curves. Show three possible
outcomes: one in which the consumer saves, one in which she bo
ows, and one in
which she neither saves nor bo
ows.
e) What determines first-period consumption in each of the three cases?
s
rs <

https:
www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid= XXXXXXXXXX
https:
www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid= XXXXXXXXXX
Either of these 2 links can be used for GDP for Q1 https:
www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid= XXXXXXXXXX
https:
www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid= XXXXXXXXXX
however, the expert has to aslo find the data for investment of canada, in order to complete the Q1
and this is the link for Q2, all other instructions are mentioned in the assignemnt pape
Answered 1 days AfterFeb 02, 2022

## Solution

Komalavalli answered on Feb 03 2022
Sheet1
year    GDPI    GDP    GDPI as % of GDP
1997    246,221    933745184781    0.000026
1998    254,185    959857765528    0.000026
1999    267,227    997968751447    0.000027
2000    280,764    1047046486898    0.000027
2001    294,296    1061763014138    0.000028
2002    297,229    1098098096475    0.000027
2003    312,737    1139947604898    0.000027
2004    339,117    1184565482256    0.000029
2005    370,058    1243744725655    0.000030
2006    393,297    1295556862674    0.000030
2007    405,755    1384543596092    0.000029
2008    412,355    1398494571594    0.000029
2009    365,701    1357541054226    0.000027
2010    407,799    1399482212059    0.000029
2011    426,710    1443522257095    0.000030
2012    447,559    1468960331816    0.000030
2013    454,044    1503174217512    0.000030
2014    464,261    1546315859832    0.000030
2015    440,073    1556508816217    0.000028
2016    419,594    1572095608555    0.000027
2017    433,636    1619885432082    0.000027
2018    444,564    1659241318826    0.000027
2019    444,491    1690126691915    0.000026
2020    431,853    1600331194689    0.000027
GDPI as % of GDP    1997    1998    1999    2000    2001    2002    2003    2004    2005    2006    2007    2008    2009    2010    2011    2012    2013    2014    2015    2016    2017    2018    2019    2020    2.6369185513678605E-5    2.6481527693864811E-5    2.6777090927195838E-5    2.6814855263183667E-5    2.7717672972327766E-5    2.7067618180385655E-5    2.743433107417989E-5    2.8627965703859163E-5    2.9753533210364535E-5    3.0357370743899279E-5    2.9306047216238227E-5    2.9485634651403099E-5    2.6938485496366395E-5    2.9139277118793373E-5    2.9560333961085499E-5    3.0467739006034686E-5    3.0205680400207262E-5    3.002368481498749E-5    2.8273081104001138E-5    2.6690106995831005E-5    2.676954748847602E-5    2.6793209339469708E-5    2.6299271062124047E-5    2.6985226647656318E-5
Debt
Debt    Gross domestic product at market prices    Debt as % of GDP
Q1 1997    1,131,076    891,748    126.8380753307
Q2 1997    1,128,659    899,412    125.4885414026
Q3 1997    1,124,080    912,564    123.1782099666
Q4 1997    1,130,775    923,980    122.3808956904
Q1 1998    1,151,431    934,612    123.1988247529
Q2 1998    1,146,424    935,212    122.5843979761
Q3 1998    1,140,128    938,872    121.435935889
Q4 1998    1,153,255    953,496    120.950166545
Q1 1999    1,177,351    975,240    120.7242319839
Q2 1999    1,172,353    994,172    117.9225526368
Q3 1999    1,173,106    1,021,308    114.8630971264
Q4 1999    1,183,186    1,040,988    113.6599077031
Q1 2000    1,195,272    1,070,188    111.6880398584
Q2 2000    1,193,666    1,099,448    108.5695730949
Q3 2000    1,186,441    1,121,768    105.765274103
Q4 2000    1,190,287    1,132,880    105.0673504696
Q1 2001    1,215,862    1,149,924    105.7341180808
Q2 2001    1,192,992    1,152,860    103.4810818313
Q3 2001    1,216,049    1,138,804    106.782993386
Q4 2001    1,221,090    1,136,584    107.4350861881
Q1 2002    1,238,844    1,158,640    106.9222536767
Q2 2002    1,232,543    1,185,892    103.9338320859
Q3 2002    1,238,265    1,204,144    102.8336311936
Q4 2002    1,242,629    1,226,100    101.3480955876
Q1 2003    1,249,282    1,250,088    99.9355245391
Q2 2003    1,237,134    1,237,720    99.9526548816
Q3 2003    1,246,898    1,258,296    99.0941718006
Q4 2003    1,254,243    1,272,884    98.535530339
Q1 2004    1,277,170    1,296,216    98.5306461269
Q2 2004    1,289,170    1,328,148    97.0652367055
Q3 2004    1,275,706    1,351,480    94.3932577619
Q4 2004    1,279,444    1,367,080    93.5895485268
Q1 2005    1,315,095    1,380,324    95.2743703652
Q2 2005    1,319,047    1,399,608    94.2440311859
Q3 2005    1,328,036    1,436,992    92.4177726807
Q4 2005    1,336,404    1,469,436    90.9467305823
Q1 2006    1,356,097    1,476,000    91.8764905149
Q2 2006    1,345,350    1,490,716    90.2485785354
Q3...
SOLUTION.PDF