A small open economy is described by the following set of equations: C = 300 +...
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 to the exchange rate, income, net exports, and the money supply if the government increases its spending by 200. Use a graph to explain what you find.
(d) Now assume a fixed exchange rate. Calculate what happens to the exchange rate, income, net exports, and the money supply if the government increases its spending by 200. Use a graph to explain what you find.
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A small open economy is described by the following set of
equations:
C = 300 +...
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...
6. An open economy is described by the following equations C = 1000 + 0.6(Y-T) I 20, 000 200r G 5...
Answer the question (c)
6. An open economy is described by the following equations C = 1000 + 0.6(Y-T) I 20, 000 200r G 5000 T = 5000 MD MS = 60.000 CA = NX = 2000-0.1Y-1000e KA = 5500+ 2(r-r") r"--10 (a) Derive the IS curve (Y as a function of r and e), LM curve (Y as a function of r) and the BP curve (r as a function of Y, e, and the capital mobility parameter z)...
Consider a small open economy with floating exchange rates. The LM curve of this economy is...
Consider a small open economy with floating exchange rates. The LM curve of this economy is given as ??=20,000???200+(????), and the IS curve is given as ??=500?20,000??+????, where ????=600?300??. Suppose that ??=1,??=100, and the world interest rate (???) is 0.025. 1) Find out the equilibrium values of output (Y), exchange rate (e), and net export (NX) of this economy. ANSWERS = Y = 400, NX = 400, e = 2/3. 2) Suppose the central bank increases the money supply to...
A small open economy has the following relationships among its variables: C = 50+0.75 (Y-T) I=200-20r...
A small open economy has the following relationships among its variables: C = 50+0.75 (Y-T) I=200-20r NX = 200-50e M/P = Y-40r G = 200 T= 200 M=3.000 P= 3 r* = 4 Q1. Please calculate the following: Equilibrium Exchange Rate Net Export Income Q2. What will be the impact of increase in G by 100 on the exchange rate, income, net exports, and the money supply?
Please give a detailed solution, thank you! 5. Given C 5000.75 (Y T) I = 2,000 -50r G 1,000 T 1,000 - 10Y - 2000r Ms 50,...
Please give a detailed
solution, thank you!
5. Given C 5000.75 (Y T) I = 2,000 -50r G 1,000 T 1,000 - 10Y - 2000r Ms 50,000 P a. Derive the IS curve and the LM curve, and find the equilibrium interest rate and output b. Government spending increases by 500. If the central bank does not react at all to this change, what is the new equilibrium output and interest rate? If instead the central bank wants to keep...
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...
Consider the Mundell-Fleming short-run model of a small open economy under floating exchange rates described by...
Consider the Mundell-Fleming short-run model of a small open economy under floating exchange rates described by the following equations (1) through (7). Assume that there are free capital flows and that interest rate parity holds so that where 5 is the world interest rate. (1) Cu 400+0.8 (Y-D: (2) 1 = 850-60r (3) G = 1200; (4) T=1000 + 0.25Y: (5) NX = 600 - 200e : (6) Y=C+I+G+ NX; (7) (M/P )= 0.5Y -50rt. Equation (6) is the goods...
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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!)...
Stacked An economy is initially described by the following equations: C = 60+ 0.8(Y-T) I =...
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An economy is initially described by the following equations: a. Derive and graph the IS and...
An economy is initially described by the following equations: a. Derive and graph the IS and LM curves. Use the accompanying diagram to graph the IS and LM curves by placing the endpoints at the correct location, then place point A at the equilibrium interest rate and level of income. C = 60+ 0.8(Y-T) I = 120-5r M/P=Y-25r G = 200 T= 200 M = 3000 P=3 IS: Y= LM: Y= IS-LM Graph 800 850 900 950 1,000 1,050 1,100...
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...
Answer the question (c)
6. An open economy is described by the following equations C = 1000 + 0.6(Y-T) I 20, 000 200r G 5000 T = 5000 MD MS = 60.000 CA = NX = 2000-0.1Y-1000e KA = 5500+ 2(r-r") r"--10 (a) Derive the IS curve (Y as a function of r and e), LM curve (Y as a function of r) and the BP curve (r as a function of Y, e, and the capital mobility parameter z)...
A small open economy has the following relationships among its variables: C = 50+0.75 (Y-T) I=200-20r NX = 200-50e M/P = Y-40r G = 200 T= 200 M=3.000 P= 3 r* = 4 Q1. Please calculate the following: Equilibrium Exchange Rate Net Export Income Q2. What will be the impact of increase in G by 100 on the exchange rate, income, net exports, and the money supply?
Please give a detailed
solution, thank you!
5. Given C 5000.75 (Y T) I = 2,000 -50r G 1,000 T 1,000 - 10Y - 2000r Ms 50,000 P a. Derive the IS curve and the LM curve, and find the equilibrium interest rate and output b. Government spending increases by 500. If the central bank does not react at all to this change, what is the new equilibrium output and interest rate? If instead the central bank wants to keep...
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...
Consider the Mundell-Fleming short-run model of a small open economy under floating exchange rates described by the following equations (1) through (7). Assume that there are free capital flows and that interest rate parity holds so that where 5 is the world interest rate. (1) Cu 400+0.8 (Y-D: (2) 1 = 850-60r (3) G = 1200; (4) T=1000 + 0.25Y: (5) NX = 600 - 200e : (6) Y=C+I+G+ NX; (7) (M/P )= 0.5Y -50rt. Equation (6) is the goods...
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Stacked An economy is initially described by the following equations: C = 60+ 0.8(Y-T) I = 120-5 M/P = Y-25r G = 200 T = 200 M = 3000 P = 3 a. Derive and graph the IS and LM curves. Use the accompanying diagram to graph the IS and LM curves by placing the endpoints at the correct location, then place point A at the equilibrium interest rate and level of income. IS: Y= LM: Y= IS: Y= LM:...
An economy is initially described by the following equations: a. Derive and graph the IS and LM curves. Use the accompanying diagram to graph the IS and LM curves by placing the endpoints at the correct location, then place point A at the equilibrium interest rate and level of income. C = 60+ 0.8(Y-T) I = 120-5r M/P=Y-25r G = 200 T= 200 M = 3000 P=3 IS: Y= LM: Y= IS-LM Graph 800 850 900 950 1,000 1,050 1,100...
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