Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A = 400 c=0.8 b = 30 io = 5 (percent) m = 0.2 Q=0 X = 250 (a) Calculate the equilibrium level of

image text in transcribed
 

A = 400 c=0.8 b = 30 io = 5 (percent) m = 0.2 Q=0 X = 250 (a) Calculate the equilibrium level of income. (b) Calculate the balance of trade. (c) Calculate the open economy multiplier, that is, the effect of an increase in A on equilib- rium output. (To answer this question, you may want to use the appendix to this chapter.) (d) Assume there is a reduction in export demand of AX = 1 (billion). By how much does income change? By how much does the trade balance worsen? (e) How much does a one percentage point increase in the interest rate (from 5 percent to 6 percent) improve the trade balance? Explain why the trade balance improves when the interest rate rises.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introductory Classical Mechanics

Authors: David Morin

1st edition

9780511808951, 521876222, 978-0521876223

More Books

Students also viewed these Physics questions