Calculations Name Consider the following model and answer related questions: \[ \begin{array}{l} \mathrm{Y}=\mathrm{C}+\mathrm{I}+\mathrm{G}+\mathrm{X}-\mathrm{IM} \\ \mathrm{C}=49+0.9 \mathrm{DI} \\ \mathrm{I}=300-2000 \mathrm{r} \\ \mathrm{G}=800 \\ \mathrm{~T}=10+1 / 3 \mathrm{Y} \\ \mathrm{X}-\mathrm{IM}=60 \end{array} \] a. If the Fed decides to set the interest rate atr=0.05, what is equilibrium GDP? b. At this rate, how much is the budget deficit or surplus? c. By how much would GDP change if the government cuts the tax rate from/3to 0.2, and at the same time, the Fed raises the interest rate from 0.05 to 0.06? d. Ignoring part (c) and returning to part (a), suppose net exports drop by 20. To offset its contractionary impact on GDP, the Fed decided to lower the rate of interest from 0.05 to 0.04 (just like during the Asian crisis). What is the new prediction for the change in GDP? e. What could this economy do on the Foreign Exchange Market instead if they wanted to offset the drop in net exports? (No calculations here, just give an idea

Name Calculations Consider the following model and answer related questions: Y=C+I+G+X-IM C=49 +0.9DI 1 =300 - 2000r G - 800 T - 10 + 1/3Y X IM =60 a. If the Fed decides to set the interest rate at r=0.05, what is equilibrium GDP? b. At this rate, how much is the budget deficit or surplus? c. By how much would GDP change if the government cuts the tax rate from 1/3 to 0.2, and at the same time the Fed raises the interest rate from 0.05 to 0.06? d. Ignoring part (c) and returning to part (a), suppose net exports drops by 20. In order to offset its contractionary impact on GDP, the Fed decides to lower the rate of interest from 0.05 to 0.04 (just like during the Asian crisis). What is the new prediction for the change in GDP? e. What could this economy do on the Foreign Exchange Market instead if they wanted to offset the drop in net exports? (No calculations here, just give an idea)