Q1. People sometimes talk about ‘twin deficit' where the twins are the current account and the government budget deficit. Carefully explain how these two deficits are related economically so that changes in one are reflected in changes in the other.
Q2. "McDonald's has a monopoly for selling Big Macs in both the U.S. and China. In the U.S. the elasticity of demand is -3. In China, the elasticity of demand is -4. The marginal cost of a Big Mac is $2. Resales are not possible. What price is charged in each country?"