Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
7th Edition
ISBN: 9780134472669
Author: Blanchard
Publisher: PEARSON
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Question
Chapter 18, Problem 3QAP
a)
To determine
To ascertain: The share of European Union spending on U.S goods compared to U.S
b)
To determine
To state: The impact of the European slump on the United States Gross Domestic Product.
c)
To determine
To state: The effect of a 5 percent drop in export on U.S. GDP.
d)
To determine
To state: The important role played by the Europe to avoid major slump problems.
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Assume that the foreign economy is characterized by the same equations as the domestic economy (with asterisks reversed). Use the two sets of equations to solve for the equilibrium output of each country. (Hint: Use the equations for the foreign economy to solve for Y* as a function of Y and substitute this solution for Y* in part (a).) What is the multiplier for each country now? Why is it different from the open economy multiplier in part (a)?
Consider the following information about an economy.
C=100+b(Y-50-0.25Y);
I=50,
G=50,
X=10,
M=5+0.1y,
t=0.25Y,
MPC=0.8
Find equilibrium national income
Find the foreign trade multiplier
What components are excluded in calculating national income and why? [
What is the effect of an increase in t of 0.3 on the equilibrium income and the multiplier?
Opening the economy to trade tends to increase the multiplier because an increase in expenditure leads to more exports.
Please explain. True or False
Chapter 18 Solutions
Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
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