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Assume that the following equations characterize a large open economy: (1) Y = 5,000 (2) Y = C + I + G + NX (3)
Assume that the following equations characterize a large open economy:
(1) Y = 5,000
(2) Y = C + I + G + NX
(3) C = 1/2(Y - T)
(4) I = 2,000 - 100r
(5) NX = 500 - 500
(6) CF = -100r
(7) CF = NX
(8) G = 1,500
(9) T = 1,000
Where NX is net exports, CF is net capital outflow, and is the real exchange rate.
- If T rises to 1250, what are the new values of I, CF, and ?
Please show all work.
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