Consider and economy described by the following equations: Y = C+I+G+ NX Y = 10000 G= 2000 T= 1500 C= 300 + .7 (Y-T) I= 500 – 25r NX = 1000 - 1000€ 1=r* = 6 a) In this economy, solve for national savings, investment, the trade balance, and the equilibrium exchange rate. b) Suppose now that G falls to 1,500. Solve for national savings, investment, the trade balance, and the equilibrium exchange rate. c) Now suppose the world interest rate falls from 6 percent to 5 percent. G is again 2000. Solve for national savings, investment, the trade balance, and the equilibrium exchange rate.
Consider and economy described by the following equations: Y = C+I+G+ NX Y = 10000 G= 2000 T= 1500 C= 300 + .7 (Y-T) I= 500 – 25r NX = 1000 - 1000€ 1=r* = 6 a) In this economy, solve for national savings, investment, the trade balance, and the equilibrium exchange rate. b) Suppose now that G falls to 1,500. Solve for national savings, investment, the trade balance, and the equilibrium exchange rate. c) Now suppose the world interest rate falls from 6 percent to 5 percent. G is again 2000. Solve for national savings, investment, the trade balance, and the equilibrium exchange rate.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter23: The International Trade And Capital Flows
Section: Chapter Questions
Problem 46P: Imagine that the economy of Germany finds itself in the following situation: the government budget...
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