The Small Open Economy macroeconomic model assumes that GDP is constant. However, the model could be used to analyze the effects of a one-time increase in GDP as a rightward shift of the supply of loanable funds. What would the model predict about the real interest rate, net capital outflow, net exports, and the real exchange rate when GDP increases?
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- An open economy is described by the following system of macroeconomic equations, in which all macroeconomic aggregate are measured in billions of Namibian dollars, N$:Y = C + I + G + X –MC = 160 + 0.6 YdT = 100 + 0.25YX = 80I = 150G = 150M = 22 + 0.25YWhere: Yis domestic incomeYdis private disposable income C is aggregate consumption spending T is government tax revenue I is investment spending X represents exports M represents imports of goods and services. (a) Determine trade balance at equilibrium. (b) Find the multiplier applicable to autonomous tax and interpret it. (c)Use the multiplier applicable to exports, to explain how a 100 billion decline in demand for exports could have affected the economy’s: (i)GDP/ output (ii)Balance of trade (iii)Government budgetAssume that four-sector model is at play. C+I+G. All expenditures are autonomous. Given: C = 700 + 80 (1-t)Y t = 0.25 I = 210 - 75i G = 1000 TR = 100 L = 0.20Y - 40i M/P = 800 Required: 1. Assuming that the fourth sector is included with an autonomous net exports of 250, what happens to equilibrium income and interest rate?In year 1, a country has saving rates, s=0.1, productivity a=2 and depreciation rate d=0.1 . In year 2, the same country has s=0.1, a=1, d=0.2 Using the endogenous growth model, find the economy’s growth rate in year 1 and What is the state of the economy in year 1? (Use business cycle words) Using the endogenous growth model, find the economy’s growth rate in year 2.What is the state of the economy in year 2? (Use business cycle words) If in year 1, delta c/c=0.2, delta u /u =-0.1 and in year 2, deltac/c=-0.1, delta u/u =0.15 , describe the variables and using business cycle words Please answer the business cycle explanation part!
- E4 How is the AD-BT-ERU curve affected by global recession ; regarding unemployment, real exchange rate and trade balance.If a country is running a government budget surplus, why is (T - G) on the left side of the saving-investment identity?State the main differences between classical and HO Model in terms of post-trade production and consumption points and the determination of the world equilibirium price ( TOT) . You must use graphs to show post trade equilibrium and trade triangles of each country , compare and explain.
- Does economic liberalization guarantee growth? Research more on its ideas, then provide your own insights on thematter of liberalization.Suppose that households decide to save a larger share of their income. Using Mundell - Fleming model for a small open economy, answer the following questions : a. How does it affect IS curve and LM curve ? explain why ? b . What are the changes in total output , exchange rate , consumption , investment and net exports of the economy? Explain why? c . Draw Mundell - Fleming graph to demonstrate your answer ?The national income (Y) of a country has the form: Y = 0.48K0.4L0.3NX0.01 Where: K is capital, L is labor and NX is net exports. a) How will a 1% increase in labor affect income? Is there an opinion that reducing the labor rate by 2% can increase net exports by 15% while keeping income unchanged, is this true or false? b) Let NX's growth rate be 4%, K is 3%, L is 5%. Determine the growth rate of Y.
- Explain and show graphically how monetary and fiscal policies can be used in a closed economy IS-LM economy that is in a recession.Question 1:In Ghana, the capital share of GDP is about 40 percent, the average growth in output is about2 percent per year, the depreciation rate is about 3 percent per year, and the capital–output ratiois about 1.5. Suppose that the production function is Cobb–Douglas and that Ghana has beenin a steady state.a. What must the saving rate be in the initial steady state? [Hint: Use the steady-staterelationship, sy = (δ + n + g)k.]b. What is the marginal product of capital in the initial steady state?c. Suppose that public policy alters the saving rate so that the economy reaches the GoldenRule level of capital. What will the marginal product of capital be at the Golden Rule steadystate? Compare the marginal product at the Golden Rule steady state to the marginal productin the initial steady state. Explain.d. What will the capital–output ratio be at the Golden Rule steady state? (Hint: For the Cobb–Douglas production function, the capital–output ratio is related to the marginal product…The open-economy macroeconomic model takesa. GDP, but not the price level as given.b. the price level, but not GDP as given.c. both the price level and GDP as given.d. the price level and GDP as variables to be determined by the model.