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1. Consider the following open economy. C 0.8Y, 0, 1 G 25 NX 20 -0.37 +...
2. Consider the following short-ru model of an open economy: Y C+I+G+NX = 50 IM = -EY The domesti...
2. Consider the following short-ru model of an open economy: Y C+I+G+NX = 50 IM = -EY The domestic and foreign prices are constant and normalized to one ((p p" 1), and the nominal exchange rate equals the real exchange rate. (a) The policy makers have an output target, YT 200, and a net- export target, NXT = 0' Show how these targets can be achieved using government consumption (G) and the exchange rate (E) as policy instruments (b) Now...
2. A small open economy is described by the following equations: C=50+0.75(Y-T) 1- 200 20 NX-200-50...
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...
1. Consider the following economy of Syldavia (a small open economy) Y=C+I+G+NX , NX = S-I...
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.
Consider the following classical economy: Desired consumption: C9 = 320 + 0.500 Y - 200r. Desired...
Consider the following classical economy: Desired consumption: C9 = 320 + 0.500 Y - 200r. Desired investment: P = 200 - 300r. Government purchases: G = 100. Net exports: NX = 140 - 0.100Y - 0.500e. Real exchange rate: e = 18 + 600r. Full-employment output: Y = 900. a. What are the equilibrium values of the real interest rate, real exchange rate, consumption, investment, and net exports? Real interest rate = Real exchange rate = ||| Consumption = ||...
B3. Open Economy IS-LM-FE model: The behaviour of households and firms in an open economy is...
B3. Open Economy IS-LM-FE model: The behaviour of households and firms in an open economy is represented by the following equations: Full-employment outputY-1200 red consumption Cd = 350 + 0.5Y-200r : Desired investmentd 250-300r Government purchasesG 95 Net exports : NX = 100-01-05e Real exchange rate : 90. Assume that the real interest rate, r, does not deviate from the foreign interest rate and that the economy is initially in general equilibrium. ve the open-economy IS curve writing the real...
Question 3 Consider a small open economy. Assume that the following variables are exogenously set: G=1,000;...
Question 3 Consider a small open economy. Assume that the following variables are exogenously set: G=1,000; T=800; L=2,500; K=3,000; A=1 and a=0.3. In addition, the consumption function is given by: C=50+0.65(Y-T). Investment is given by: 1=1,000-20r Finally, the world real interest rate is 6% and net exports are given by: NX=500-100€ (e=real exchange rate) Using the long-run model developed in chapter 5, compute the equilibrium values of the following variables. National saving equals Investment equals Trade balance equals The real...
E. The following equations describe the domestic economy: C = 20+ 0.8Y I = 0, G =0, X = 0.03Y* and Q=0.3Y And the follo...
E. The following equations describe the domestic economy: C = 20+ 0.8Y I = 0, G =0, X = 0.03Y* and Q=0.3Y And the following equations describe the foreign economy: C* = 200+ 0.8Y I* = 0, G* = 0, X* = 75 +0.25Y, and Q* = 0.1Y* Suppose the real exchange rates in both economies are fixed and equal to one. 1. Find equilibrium Y and Y*. 2. Suppose that the domestic economy experiences a 10% drop in its...
Suppose policy makers want to increase net exports (NX) and keep output (Y) constant. Which of...
Suppose policy makers want to increase net exports (NX) and keep output (Y) constant. Which of the following policies would most likely achieve this? A. an increase in government spending B. a real depreciation C.an increase in government spending and a decrease in the real exchange rate D. a decrease in the real exchange rate and a tax increase
The following equations describe the domestic economy: C 20+0.8Y I 0, G 0 X 0.03Y, and...
The following equations describe the domestic economy: C 20+0.8Y I 0, G 0 X 0.03Y, and Q 0.3Y And the following equations describe the foreign economy: C" =2000.8Y I0, G =0, -75+0.25Y, and Q0.1Y X= Suppose the real exchange rates in both economies are fixed and equal to one. Find equilibrium Y and Y* b) Suppose that the domestic economy experiences a 10% drop in its autonomous consumption, a) i.e. the consumption function changes to C = 18+0.8Y Find the...
ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption...
ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption is:C = 100+ 0.8Y Assume further that planned investment lo and net exports Xn are independent of the level of real GDP and constant at lg = 60 and Xn = 10. Government spending (G) is equal to $0. Recall also that, in equilibrium, the real output produced (y) is equal to aggregate expenditures: Y=C+Ig+G+Xn nstructions: Round your answers to the nearest whole number. a. What is the...
2. Consider the following short-ru model of an open economy: Y C+I+G+NX = 50 IM = -EY The domestic and foreign prices are constant and normalized to one ((p p" 1), and the nominal exchange rate equals the real exchange rate. (a) The policy makers have an output target, YT 200, and a net- export target, NXT = 0' Show how these targets can be achieved using government consumption (G) and the exchange rate (E) as policy instruments (b) Now...
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...
Consider the following classical economy: Desired consumption: C9 = 320 + 0.500 Y - 200r. Desired investment: P = 200 - 300r. Government purchases: G = 100. Net exports: NX = 140 - 0.100Y - 0.500e. Real exchange rate: e = 18 + 600r. Full-employment output: Y = 900. a. What are the equilibrium values of the real interest rate, real exchange rate, consumption, investment, and net exports? Real interest rate = Real exchange rate = ||| Consumption = ||...
B3. Open Economy IS-LM-FE model: The behaviour of households and firms in an open economy is represented by the following equations: Full-employment outputY-1200 red consumption Cd = 350 + 0.5Y-200r : Desired investmentd 250-300r Government purchasesG 95 Net exports : NX = 100-01-05e Real exchange rate : 90. Assume that the real interest rate, r, does not deviate from the foreign interest rate and that the economy is initially in general equilibrium. ve the open-economy IS curve writing the real...
Question 3 Consider a small open economy. Assume that the following variables are exogenously set: G=1,000; T=800; L=2,500; K=3,000; A=1 and a=0.3. In addition, the consumption function is given by: C=50+0.65(Y-T). Investment is given by: 1=1,000-20r Finally, the world real interest rate is 6% and net exports are given by: NX=500-100€ (e=real exchange rate) Using the long-run model developed in chapter 5, compute the equilibrium values of the following variables. National saving equals Investment equals Trade balance equals The real...
E. The following equations describe the domestic economy: C = 20+ 0.8Y I = 0, G =0, X = 0.03Y* and Q=0.3Y And the following equations describe the foreign economy: C* = 200+ 0.8Y I* = 0, G* = 0, X* = 75 +0.25Y, and Q* = 0.1Y* Suppose the real exchange rates in both economies are fixed and equal to one. 1. Find equilibrium Y and Y*. 2. Suppose that the domestic economy experiences a 10% drop in its...
The following equations describe the domestic economy: C 20+0.8Y I 0, G 0 X 0.03Y, and Q 0.3Y And the following equations describe the foreign economy: C" =2000.8Y I0, G =0, -75+0.25Y, and Q0.1Y X= Suppose the real exchange rates in both economies are fixed and equal to one. Find equilibrium Y and Y* b) Suppose that the domestic economy experiences a 10% drop in its autonomous consumption, a) i.e. the consumption function changes to C = 18+0.8Y Find the...
ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption is:C = 100+ 0.8Y Assume further that planned investment lo and net exports Xn are independent of the level of real GDP and constant at lg = 60 and Xn = 10. Government spending (G) is equal to $0. Recall also that, in equilibrium, the real output produced (y) is equal to aggregate expenditures: Y=C+Ig+G+Xn nstructions: Round your answers to the nearest whole number. a. What is the...
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