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Inter-temporal production

Which of the following countries would you expect to have intertemporal production possibilities biased toward current consumption goods, and which biased toward future consumption goods? Why?

a. A country, like Argentina or Canada i the last century, that has only recently been opened for large-scale settlement is receiving large inflows of immigrants.

b. A country, like the United Kingdom in the late nineteenth century or the United States today, that leads the world technologically but is seeing that lead eroded as other countries catch up.

c. A country that has discovered large oil reserves that can be exploited only with massive investment (like Norway, whose oil lies under the North Sea).

d. A country that has discovered large oil reserves that can be exploited with little new investment (like Saudi Arabia).

e. A country like South Korea that has discovered the knack of producing industrial goods and is rapidly gaining on advanced countries.

Solution Preview

a) This will depend on the effects of the increase in the population due to immigration movements on the national disposable income. If the aggregate disposable income falls, then the society will tend to consume less current products, but probably they also will reduce their capacity of saving. So the intertemporal production possibilities might be biased to future consumption in the last century.

On the other ...

Solution Summary

The solution goes into a considerable amount of detail related to the questions being asked. The solution clearly explains the rationale behind selecting countries that the OTA might expect to have intertemporal production possibilities biased towards current production goods. The solution is very well developed and gives a clear and concise answer to the question. The explanation provided is again very easy to understand. Overall, an excellent response to the question being asked.

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