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. A small open economy is characterized by the following set of equations: S 10 +100r*...
4. Assume the following set of equations characterize a small open economy E R o nd (1) Y = 10,000 (2) Y=C+I+G + NX (3) C = 0.75(Y-T) D (4) I = 3.000 - 100r (5) NX = 500 - 500€ (6) CF = -100r Elo (7) CF = NXPO ato hone (8) G = 2.5500 TO FOOD (9) T = 1,800. (10)r=r* = 8.5% mbo TO is net exports, CF is net capital outflow, and is the real exchange...
1. Consider the following economy of Syldavia (a small open economy) Y=C+I+G+NX , NX = S-I Y=8000 G=750 T=750 C=1000+0.75(Y-T) I=1000-100r NX=500-500e r=r*=5 d. [ 5 points] Suppose the world interest rate drop from r=5 to 2percent (assume government G=750). Find the national saving, investment, trade balance, capital outflow and equilibrium exchange rate.
A small open economy is described by the following set of equations: C = 300 + 0.6(Y − T) I = 700 − 80r NX = 200 − 50ε G = T = 500 (Balanced Budget) (M/P)^d = Y − 200r M = 3, 000 P = 3 r ∗ = 5 (a) Derive and graph the IS∗ and LM∗ curves. (b) Calculate the equilibrium exchange rate, income and net exports. (c) Assume a floating exchange rate. Calculate what happens...
Assume that the economy is characterized by the following equations: C = 1000 + 0.6 (Y-T) T = 1500 G = 2000 I= 1100 - 100r L (r,Y) = 1000 + 0.5y - 500r Ms = 12000 P = 2 Derive the IS, LM equations. Calculate the equilibrium Y and r. If =14000, is the economy in recession or expansion? If the objective of policymakers is to keep the economy at its natural output level and have a balanced budget,...
Consider the Mundel-Fleming small open economy model: Y=C(Y-T)+1(1) + G Y = F(K,L) (M/P) L(r+z® Y) Goods Money C = 50+0.8(Y- T) M 3000 I = 200-20r r*=5 NX = 200-508 P = 3 G=T= 150 L(Y, r) Y - 30r 1- find the IS* equation (hint : y as a function of e) 2- find the LM* equation (hint, also relates y and maybe e) 3-draw the IS-LM curve I y 4- find the equilibrium interest rate (trick question!)...
2. A small open economy is described by the following equations: C=50+0.75(Y-T) 1- 200 20 NX-200-50 G- 200 T-200 M 3000 P-3 r' = 5 (a) Derive and graph the IS and LM* curves. (b) Calculate the equilibrium exchange rate, level of income, and net exports (c) Assume a floating exchange rate. Calculate what happens to the exchange rate, the level of income, net exports, and the money supply if the government increases spending by 50. Use a graph to...
Assume an goods and services market of an economy is characterized by the following equations: C = 0.8 (Y - T) I = 800 -20r Y = C + I + G T = 1000 G = 1000 9. Consider for the moment the Keynesian Cross model. What will happen to the GDP if G increases by 200? What is the multiplier? 10.Keep considering the Keynesian Cross model. What will happen to the GDP if T increases by 200? What...
Assume an goods and services market of an economy is characterized by the following equations: C = 0.8 (Y-T) 1 = 800-20r Y =C+I+G T = 1000 G = 1000 9. Consider for the moment the Keynesian Cross model. What will happen to the GDP if G increases by 200? What is the multiplier? 10. Keep considering the Keynesian Cross model. What will happen to the GDP if T increases by 200? What if both G and T increase by...
Assume an goods and services market of an economy is characterized by the following equations: C = 0.8 (Y - T) I = 800 -20r Y=C+I+G T = 1000 G = 1000 1. Derive a formula for the IS curve, showing Y as a function of r. The money market for this economy is described by the equations: (M/P) d = 0.4Y - 40r M = 1200 P=1 a) Derive a formula for the LM curve, showing Y as a...
Consider an open economy described by the following equations (all figures in millions of dollars): Y = C + I + G + NX Y = 8,000 (current value of output) G = 2,000 T = 1,000 + .1(Y) C = 450 + 0.75 (Y – T) I = 2,000 – 40 r NX = 700- 600ɛ (ɛ is the exchange rate) r = r* = 5 a) What is the current state of this economy in term of national...