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3. Consider the following classical economy: Desired consumption Desired investment, Government purchases Net exports Real exchange rate

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3. Consider the following classical economy: Desired consumption Desired investment, Government purchases Net exports Real exchange rate Full-employment output In this economy, the real interest rate does not deviate from the foreign interest rate.

a. What are the equilibrium valuesofthe real interest. rate, the real exchange rate, consumption, investment, and net exports?

b. Now, suppose that full-employment output increases to 940. What are the equilibrium values of the real interest rate, the real exchange rate, consumption, investment, and net exports?

e. Suppose that full-employment output remains at 940 and that government purchases increase to 132. What are the equilibrium values of the real interest rate, the real exchange rate, consumption, investment, and net exports?

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