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- What does it mean by "monetary and fiscal policies in a closed economy" when pertaining to macroeconomic policy in an open economy?What do the terms internal balance and external balance mean in open-economy macroeconomics?graphically compare effects of monetary or fiscal expansion on equilibrium output in closed and open economy. EXPLAIN your results
- Will a direct increase in the price of U.S. goods relative to foreign goods lead to a change in the quantity demanded of Real GDP or to a change in Aggregate Demand? Will a change in the exchange rate that subsequently increases the price of U.S. goods relative to foreign goods lead to a change in the quantity demanded of Real GDP or to a change in Aggregate Demand?If the government reduces government purchases, then what happens to the real interest rate in a closed economy, small open economy, and a large open economy?Suppose you heard on the news that the three sectors of a closed economy are all spending more but, so far, there has been little to no change in the price level." What is the macroeconomics in this situation?
- In a large open economy, if households’ current income increases, then the real interest rate __________ and the equilibrium current account for this economy __________.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 budgetDifferentiate between a closed economy and an open economy
