1. What are the effects of movements in prices due to conditions of supply and demand in the equilibria of an open economy market?

Be:

C = Co + c1Yd	l = lo + dY-bi	G = Go
Tr = Tro	M = Mo + My	X = Xo
Ms = Ms /P	Md = Lo + kY - hi

Co = 2000	TRo =65	d = 0.2	Mo = 85	Ms = 400	k = 0.35
lo = 350	To = 85	t = 0.15	Xo = 100	P = 2	Lo = 20
G = 220	c1 = 0.8	b = 255	m = 0.13	h = 210

a) Find the equilibrium income and interest rate.

b) Interpret the Keynesian multiplier of an open economy

c) What are the implications of a 20% increase in government spending, as an expansionary fiscal policy measure? would it be recommended? explain