EBK MACROECONOMICS
10th Edition
ISBN: 9780134896571
Author: CROUSHORE
Publisher: VST
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 13, Problem 7RQ
To determine
Difference in IS-LM model of closed and open economy and use of model for transferring recession to other countries.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
What is the relationship between national saving
and investment in a closed economy? Start by
explaining what is a closed economy.
Consider the following information about an open economy: GDP is $1,000 million, consumption is $850 million, taxes are
$50 million, government spending is $100 million, exports are $100 million, and imports are $125 million. Calculate the
following variables for this economy:
Instructions: Enter numbers rounded to the nearest whole number.
a. Net exports:
million
b. Investment:
million
c. Private savings:
million
d. Public savings:
|million
e. National savings:
million
What is Foreign Direct Investment (FDI) all about?
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Which of the following is TRUE of an open economy? GDP = C+I+G+X- IM O GDP = C+ I+G GDP = T- TR -G GDP = SPrivate + SGovernment %3Darrow_forwardThe 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?arrow_forwardWhat is the difference between a closed and open economy. Define in a well manner.arrow_forward
- 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?arrow_forwardEconomics Consider the following data for country B, an open economy, for this year: Y = $14 trillion C = $6 trillion G = $2 trillion NX = $3 trillion T = $4 trillion TR = $0.5 trillion a) Find country B’s domestic investment. b) Find country B’s private saving. c) Find country B’s public saving. d) Find country A’s national saving. e) Find country B’s net foreign investmentarrow_forwardAn open economy is described by the following system of macroeconomic equations, in which all macroeconomic aggregate are measured in billions of Namibian dollars, N$: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 budgetarrow_forward
- Consider the following hypothetical open economy. According to the expenditure approach, for this economy, Y = C + I + G + NX. Additionally, for the year 2020 the economy is characterized as follows: National saving is 30 percent of GDP Investment is 20 percent of GDP Net capital outflow 1 trillion dollars In this economy in 2020, what is the level of GDP or Y? Please report your answer in trillions of dollars.arrow_forwardBriefly explain whether investment spending is likely to increase more rapidly in a country with a rapidly growing population or in a country with a slowly growing population. Does your answer depend on whether the country is a high-income industrial country or a low-income developing country?arrow_forwardFor an open economy, the equation Y = C + I + G + NX is an identity. If we define national saving, S, as the total income in the economy that is left after paying for consumption and government purchases, then for an open economy, it is true that a. S = I. b. S = / + NX. C./ = S + NX. d. S = 0.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
