Difference in IS-LM model of closed and open economy and use of model for transferring recession to other countries.

Question

Want to see the full answer?

Answer 1

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

See solution

Students have asked these similar questions

In a small open economy, if the budget deficit increases, then which of the following is likely to be accurate? a. If private saving and domestic investment stay the same, then net exports increase. b. If private saving stays the same and net exports increase, then domestic investment decreases. c. If private saving decreases and domestic investment stays the same, then net exports increase. d. If private saving increases and net exports decrease, then domestic investment decreases.

Which of the following statements is true? A)The open-economy IS curve is derived in the same way that the closed-economy IS curve is derived. B)The closed-economy IS curve is downward sloping, but the open-economy IS curve is upward sloping. C)Some factors that shift the IS curve in the closed economy in one direction will shift the IS curve in the open economy in the opposite direction. D)Factors that raise a country's current net exports, given domestic output and the domestic real interest rate, shift the open-economy IS curve up.

In an open economy the national income identity shows that: Where S stands for national savings, I for investment spending and NX for the trade balance. Carefully state this identity in words and explain why it is expected to hold.