Consider the goods market for a small open economy, where e is the real exchange rate, X are exports, IM are imports and Y is foreign income. C=254 +0.6YD X= 0.17Y - 101e IM = 0.5Y + 118e 1=0.05Y-7261 G= 913 T 1032 Y=3391 1= 0.03 (3%) e 1 Claculate the level of equilibrium output and the trade balance in this economy: OA Y=1061.98, NX -157.72 OB. Y 1038.98; NX -162.02 Oc. Y= 1020.11; NX -154.15 OD. Y 1080.28; NX -168.32
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- Consider the goods market for a small open economy, where e is the real exchange rate, X are exports, IM are imports and Y* is foreign income., C- 268 + 0.55YD X= 0.18Y - 107e 1=0.15Y - 786 I G= 930 T= 1000 IM = 0.7Y + 113e Y=3749 i= 0.01 (1%) e= 1 Claculate the level of equilibrium output and the trade balance in this economy: OA. Y=1117.96; NX = -307.35 OB. Y= 1094.96; NX= -311.65 OC. Y= 1076.09; NX= -303.78 OD. Y= 1136.26, NX = -317.95A small open economy is described by the following equations: C = 50 + 0.75(Y – T) |= 200 -20r NX = 200 - 50e M/P = Y - 40r G = 200 T= 200 M = 3,000 P= 3 r* = 5 The equilibrium exchange rate is (please enter your answer in numerical form with no decimal space, comma, or percentage), the equilibrium income is (please enter your answer in numerical form with no decimal space, comma, or dollar sign), and net exports is (please enter your answer in numerical form with no decimal space, comma, or dollar sign). If the government increases its spending by 50, assuming a floating exchange rate, the equilibrium exchange rate is (please enter your answer in numerical form with no decimal space, comma, or percentage), the equilibrium income is (please enter your answer in numerical form with no decimal space, comma, or dollar sign), and net exports is (please enter your answer in numerical form with no decimal space, comma, or dollar sign). If the government increases its spending by 50, assuming…Consider a small country that is closed to trade, so its net exports are equal to zero. The following equations describe the economy of this country in billions of dollars, where C is consumption, DI is disposable income, I is investment, and G is government purchases: C� = = 30+0.8×DI30+0.8×DI G� = = 5050 I� = = 6060 Initially, this economy had a lump sum tax. Suppose net taxes were $50 billion, so that disposable income was equal to Y – 50, where Y is real GDP. In this case, this economy's aggregate output demanded was ___________ . Suppose the government decides to increase spending by $10 billion without raising taxes. Because the spending multiplier is ____________ , this will increase the economy's aggregate output demanded by ____________ . Now suppose that the government switches to a proportional tax on income of 10%. Because consumers retain the remaining 90% of their income, disposable income is now equal to 0.90Y. In this case, the economy's aggregate output…
- The following equations describe a small open-economy: C = 10 + 0.5Y I = 160 - 50r NX = 80 - 0.1Y - e e = 50 - 0.1Y + B (r-r*) G= 10 where C is consumption, I is investment, Y is domestic output, r is the domestic real interest rate, NX is net exports, e is the real exchange rate, G is government spending and r* is the foreign real interest rate. (a) Suppose that ß is fairly small, ß = 5, full employment output is Y = 400 and r* = 0.1. What is the equilibrium value of the domestic interest rate, r? (b) Consider instead that ß is fairly large, B = 1000, where again Y = 400 and r* = 0.1. What is the equilibrium value of the domestic interest rate? (c) What happens to r as ß increases? Does r converge to r* as ß approaches infinity? What type of small open economy model does this resemble?Consider a large one economy where: Cd= 1+.9(Y-T)-150r Id=80-200r y=250 T=40 G=50 NFP=0 If the saving schedule for the rest of the world is Sd=15+516.6r and its investment schedule is Id=120-300r, then: a) What is the equilibrium world interest rate? b) What is the current account for the large open economy? c) What is the financial account for the large open economy?Question 2: The following information is given for an open economy. C= 40 + 0.75 (Y-T), I-80, G-50, and T=60 Imports and exports are given by: IM =0.25Y and X=0.3Y* Foreign income (Y*) =700 a) Solve for equilibrium output in the domestic economy. (10 points) b) Solve for the trade balance. Does the country have a trade surplus or deficit? How much? (5) c) Draw representative graphs of the goods market and net-exports. Draw your graphs to illustrate the trade balance at the equilibrium level of output. (10) d) What happens to equilibrium output and the trade balance if government expenditures increase to 100? Show the impact of this change on the graphs that you drew in part c. (10) e) What is the status of the government budget (deficit/surplus) before and after the expansionary fiscal policy? (5)
- Suppose the U.S.-EU exchange rate is $1.15 per Euro, the U.S. has 5% inflation, and the EU has 10% inflation. Under these conditions the real U.S.-EU exchange rate, rounded to the nearest cent, is approximately: $1.20 per Euro $1.10 per Euro $1.30 per Euro $1.09 per EuroThe table given below shows the levels of real GDP (Y) and the corresponding levels of consumption (C), planned investment (1I), export (EX), and import (IM) of an open economy. Assume that in this country, the aggregate price level is constant, the interest rate is fixed, and there are no taxes. Table 7 Y C EX IM $0 $100 $520 $420 $480 $20 $1,500 $1,075 $520 $420 $480 $245 $3,000 $2,050 $520 $420 $480 $470 $4,500 $3,025 $520 $420 $480 $695 $6,000 $4,000 $520 $420 $480 $920 $7,500 $4,975 $520 $420 $480 $1,145 Refer to Table 7. What is the equilibrium level of real GDP? $1,500 $3,000 $4.500 14 tv MacBook Air 吕0 888 F3 F4 F5 DD F6 F7 F8 F9 F10 # $ % & 3 4 5 8. E R Y U * 00Assume that a small open economy with a fixed exchange rate is given by: LM curve is given by: Y = 700 r – 250 + 2(M/P) IS curve is given by: Y = 400 + 3G – 2T + 3NX – 300 r Function for the net exports is: NX = 550 – 100 e (where e is the exchange rate) Price level is fixed at 1 World interest rate is r* = 2 Exchange rate is initially = 3 If M = 200, G = 350, and T = 200, solve for: a. The equilibrium short-run value of Y = b. The equilibrium short-run value of NX =
- Consider a small open economy with the following information: C = 50 + 0.80 (Y – T) I= 200 – 2,000r NX = 100 – 25ɛ (M/P)d = Y – 4, 000r G= 300 T= 300 M = 4,000 P= 4 r* = 5% a. Estimate the equilibrium exchange rate, level of income, and net exports in the economy.The equilibrium condition for GDP in an open economy is: Y = C + I + G + (X – M) GDP can be eitherspent, saved, or taxed away , so it is necessary that: Y = Substituting the second equation into the first equation and rearranging yields: X – M = The fundamental equation shows that an increase in the taxes will cause the budget deficit to , which should the trade deficit.You have just been hired by the U.S. government to analyze the following scenario. Suppose the U.S. agricultural industry is concerned about the level of fruit and vegetable imports to the United States, a practice that hurts domestic producers. Lobbyists claim that implementing a quota on imports would shrink the size of the trade deficit. The following exercise will help you to analyze this claim. The following graph shows the demand and supply of U.S. dollars in a model of the foreign-currency exchange market. Given this change, the dollar (appreciate, depreciate) . Fill in the following table with the effect of a quota on the following items: Supply of Loanable Funds Real Interest Rate Domestic Investment Net Exports in crease, decrease, or no change increase, decrease or no change increase decrease or no change increase , decrease or no change