Question
A small open economy can be described by the following: C = 3000 + 0.75(Y - T)P = 1.20 I = 6000 - 2000rNX =
A small open economy can be described by the following:
C = 3000 + 0.75(Y - T)P = 1.20
I = 6000 - 2000rNX = 7750 - 200e
G = 6000MD = ( 0.25Y - 2500r )
r(world) = 0.25
e = Nominal exchange rate (in # of FC units per DC unit)
The government budget is balanced.
NOTE:Keep your answers to 2 decimals. When you are asked for numerical answers, DO NOT enter any unit of measurement, or comma, or cite the variable again.
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Part A)
Suppose the country has a flexible exchange rate regime and the nominal money supply is equal to 20070. In the initial short-run equilibrium, "consumption is equal to( ),net exports is equal to ( ), real output is equal to ( ), and the nominal exchange rate is equal to ( ),"
Part B)
Now suppose the country adopts a fixed exchange rate regime and fixes the nominal exchange rate at 0.90. In the new short-run equilibrium, "consumption is equal to ( ),,net exports is equal to ( ),, real output is equal to ( ),, and the nominal money supply is equal to ( ),"
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