1) Use the following information for a small open economy to answer parts a through e. Y = 16,750 C =0.75 (Y - T) I = 1500 - 20r T = 750 G = 2500 NX = 900 - 58 r = r* = 5 a) (4 points) Set up the equilibrium condition for the small open economy and find the equilibrium real exchange rate. b) (2 points) Given the equilibrium real interest rate from part a), is the government running a trade deficit or surplus? c) (10 points) The government expands investment tax credits, causing an increase in investment demand. i) Show graphically what will happen to the level of savings/investment ii) Show graphically what will happen to the real exchange rate and net exports d) (4 points) If the expanded tax credit in part c) causes investment demand to increase by $500. What is the new equilibrium real exchange rate? e) (2 points) Using the equilibrium real exchange rate you found in parts a), find the nominal exchange rate if the domestic price of the basket is $100 and the foreign price of the basket is 120f