Equilibrium level of output, multiplier in closed and open economy and reason for difference.

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Answer 1

Question

Chapter 18, Problem 8QAP

a

To determine

Interpretation:

Equilibrium level of output, multiplier in closed and open economy and reason for difference.

b

To determine

Interpretation: Equilibrium level of output, multiplier in both countries and reason for difference in multiplier.

c

To determine

Interpretation: Increase in G to achieve target output and net exports and budget deficit in both countries.

d

To determine

Interpretation: Common increase in G and G* to achieve the target output.

e

To determine

Interpretation:

Reason for difficulty in achieving fiscal coordination.

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Consider the following open economy. The real exchange rate is fixed and equal to one. Consumption, investment, government spending, and taxes are given by:C = 8 + 0.6(Y - T), I = G = T = 0.Imports/ exports are given by:Q = 0.4Y, X = 0.4Y*,where an asterisk denotes a foreign variable a. If the domestic government increases spending by 6 units (i.e., G increases from 0 to 6), the equilibrium output in the domestic country will increase by ____. and the trade balance will ________ (increase/decrease) by _____. b. Assume the foreign economy has the same equations as the domestic economy. Both governments consider the impact of the other country on the domestic economy. If the domestic government increases spending by 6 units as in b) and G=0 in the foreign country, the equilibrium output in the domestic country increases by _______ units, and the trade balance in equilibrium is _____. c. Please compare answer a) and b) regarding the equilibrium output and explain the difference.

Consider the following open economy. The real exchange rate is fixed and equal to one. Consumption,investment, government spending, and taxes are given by:C = 8 + 0.6(Y - T), I = G = T = 0.Imports/ exports are given by:Q = 0.4Y, X = 0.4Y*,where an asterisk denotes a foreign variable. if the domestic government increases spending by 6 units as in b) and G=0in the foreign country, the equilibrium output in the domestic country increases by units, and the trade balance in equilibrium is Now, suppose that the two countries coordinate in their fiscal policy. Both countries set atarget level of output of 30 and agree to increase G at the same amount. The common increase in Gnecessary to achieve the target output is and the trade balance is

Consider the following open economy. The real exchange rate is fixed and equal to one. Consumption, investment, government spending, and taxes are given by:C = 8 + 0.6(Y - T), I = G = T = 0.Imports/ exports are given by:Q = 0.4Y, X = 0.4Y*,where an asterisk denotes a foreign variable a. Suppose that the domestic country takes foreign income Y* as given. The equilibrium output in the domestic economy is? b. Following a), if the domestic government increases spending by 6 units (i.e., G increases from 0 to 6), the equilibrium output in the domestic country will increase by ____. and the trade balance will ________ (increase/decrease) by _____. c. Assume the foreign economy has the same equations as the domestic economy. Both governments consider the impact of the other country on the domestic economy. If G=0, then the equilibrium output in both countries is ______ and the trade balance is ______. d. Following c), if the domestic government increases spending by 6 units as in b) and G=0…

Answer 2

Question

Chapter 18, Problem 8QAP

a

To determine

Interpretation:

Equilibrium level of output, multiplier in closed and open economy and reason for difference.

b

To determine

Interpretation: Equilibrium level of output, multiplier in both countries and reason for difference in multiplier.

c

To determine

Interpretation: Increase in G to achieve target output and net exports and budget deficit in both countries.

d

To determine

Interpretation: Common increase in G and G* to achieve the target output.

e

To determine

Interpretation:

Reason for difficulty in achieving fiscal coordination.

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Answer 3

Question

Chapter 18, Problem 8QAP

a

To determine

Interpretation:

Equilibrium level of output, multiplier in closed and open economy and reason for difference.

b

To determine

Interpretation: Equilibrium level of output, multiplier in both countries and reason for difference in multiplier.

c

To determine

Interpretation: Increase in G to achieve target output and net exports and budget deficit in both countries.

d

To determine

Interpretation: Common increase in G and G* to achieve the target output.

e

To determine

Interpretation:

Reason for difficulty in achieving fiscal coordination.

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Answer 4

Question

Chapter 18, Problem 8QAP

a

To determine

Interpretation:

Equilibrium level of output, multiplier in closed and open economy and reason for difference.

b

To determine

Interpretation: Equilibrium level of output, multiplier in both countries and reason for difference in multiplier.

c

To determine

Interpretation: Increase in G to achieve target output and net exports and budget deficit in both countries.

d

To determine

Interpretation: Common increase in G and G* to achieve the target output.

e

To determine

Interpretation:

Reason for difficulty in achieving fiscal coordination.

Expert Solution & Answer

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Answer 5

Chapter 18, Problem 8QAP

a

To determine

Interpretation:

Equilibrium level of output, multiplier in closed and open economy and reason for difference.

b

To determine

Interpretation: Equilibrium level of output, multiplier in both countries and reason for difference in multiplier.

c

To determine

Interpretation: Increase in G to achieve target output and net exports and budget deficit in both countries.

d

To determine

Interpretation: Common increase in G and G* to achieve the target output.

e

To determine

Interpretation:

Reason for difficulty in achieving fiscal coordination.

Answer 6

Chapter 18, Problem 8QAP

a

To determine

Interpretation:

Equilibrium level of output, multiplier in closed and open economy and reason for difference.

Answer 7

Chapter 18, Problem 8QAP

a

To determine

Interpretation:

Equilibrium level of output, multiplier in closed and open economy and reason for difference.

Answer 8

b

To determine

Interpretation: Equilibrium level of output, multiplier in both countries and reason for difference in multiplier.

Answer 9

b

To determine

Interpretation: Equilibrium level of output, multiplier in both countries and reason for difference in multiplier.

Answer 10

c

To determine

Interpretation: Increase in G to achieve target output and net exports and budget deficit in both countries.

Answer 11

c

To determine

Interpretation: Increase in G to achieve target output and net exports and budget deficit in both countries.

Answer 12

d

To determine

Interpretation: Common increase in G and G* to achieve the target output.

Answer 13

d

To determine

Interpretation: Common increase in G and G* to achieve the target output.

Answer 14

e

To determine

Interpretation:

Reason for difficulty in achieving fiscal coordination.

Answer 15

e

To determine

Interpretation:

Reason for difficulty in achieving fiscal coordination.

Answer 16

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Answer 17

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Answer 18

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Answer 19

Ch. 18 - Prob. 1QAP Ch. 18 - Prob. 2QAP Ch. 18 - Prob. 3QAP Ch. 18 - Prob. 4QAP Ch. 18 - Prob. 5QAP Ch. 18 - Prob. 6QAP Ch. 18 - Prob. 7QAP Ch. 18 - Prob. 8QAP

Equilibrium level of output, multiplier in closed and open economy and reason for difference.

Solution Summary: The author explains the calculation of equilibrium output, multiplier in closed and open economy, and reason for difference.

Interpretation:

Equilibrium level of output, multiplier in closed and open economy and reason for difference.

Interpretation: Equilibrium level of output, multiplier in both countries and reason for difference in multiplier.

Interpretation: Increase in G to achieve target output and net exports and budget deficit in both countries.

Interpretation: Common increase in G and G* to achieve the target output.

Interpretation:

Reason for difficulty in achieving fiscal coordination.

Want to see the full answer?

Chapter 18 Solutions

Equilibrium level of output, multiplier in closed and open economy and reason for difference.

Solution Summary: The author explains the calculation of equilibrium output, multiplier in closed and open economy, and reason for difference.

Interpretation: Equilibrium level of output, multiplier in closed and open economy and reason for difference.

Interpretation: Equilibrium level of output, multiplier in both countries and reason for difference in multiplier.

Interpretation: Increase in G to achieve target output and net exports and budget deficit in both countries.

Interpretation: Common increase in G and G* to achieve the target output.

Interpretation: Reason for difficulty in achieving fiscal coordination.

Want to see the full answer?

Chapter 18 Solutions

Interpretation:

Equilibrium level of output, multiplier in closed and open economy and reason for difference.

Interpretation:

Reason for difficulty in achieving fiscal coordination.