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2. Assume that the LM curve for a small open economy with a floating exchange rate is given by Y = 200r - 200 +
2. Assume that the LM curve for a small open economy with a floating exchange rate is given by Y = 200r - 200 + 2(M/P), while the IS curve is Y = 400 + 3G - 27+ 3NX - 200r. The function for NX is NX = 200 - 100e, where e is the exchange rate. The price level (P) is fixed at 1.0. The international interest rate is y* = 2.5 percent. a. Using the LM curve, find the equilibrium level of Y in the small open economy, if M= 100. b. Given this value of Y, if G = 100 and 7= 100, what must be the equilibrium value of NX? c. If this value of MX is to be achieved, what must be the equilibrium exchange rate, e
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