1. Consider an economy described by the following equations; Y = C + I + G +NX Y = 5,000 G = 1,000 T = 1,000 C = 250 + 0.75(Y–T) I = 1,000 – 50r NX = 500 – 500ε r = r * =5% a) In this economy, solve for national saving, investment, trade balance and the equilibrium exchange rate. b) Suppose now that G rises to 1,200. Solve for national saving, investment, trade balance and the equilibrium exchange rate and trade balance.

1. Consider an economy described by the following equations; Y = C + I + G +NX Y = 5,000 G = 1,000 T = 1,000 C = 250 + 0.75(Y–T) I = 1,000 – 50r NX = 500 – 500ε r = r * =5% a) In this economy, solve for national saving, investment, trade balance and the equilibrium exchange rate. b) Suppose now that G rises to 1,200. Solve for national saving, investment, trade balance and the equilibrium exchange rate and trade balance.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Savings,investment And The Financial System

Section: Chapter Questions

Problem 3PA

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