Consider two open economies, A and B, characterized by the equations on the right. The parameters m1 and x1 are the propensities to import and export. Assume that the real exchange rate is xed at a value of 1 and treat foreign income, Y', as xed. Also assume that taxes are xed and that government purchases are exogenous (i.e., decided by the government). We explore the effectiveness of changes in G uncler alternative assumptions about the propensity to import. Given this information, which of the two economies do you think is larger? OA.A O B. B O C. A and B are likely to be equally large. Suppose government purchases in each economy increase by one unit. {Assume the two economies do not trade with each other.) Output in A will by 1. Output in B will by Netexports in Awill I: by D. Net exports in B will by C = CO + c, ( Y - T) 1 = do + d, Y IM = MY X = XY * cy +d, =0.8 in both A and B my = 0.2 in A; my = 0.5 in B