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Consider two open economies in which the real exchange Domestic economy: rate is fixed and equal to one. Consumption, investment, government spending, taxes, imports and

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Consider two open economies in which the real exchange Domestic economy: rate is fixed and equal to one. Consumption, investment, government spending, taxes, imports and exports are given by equations on the right for each economy. C = 11 + 0.7 (Y - T) Variables with "" denote values for the foreign economy. 1 = 12 Solve for equilibrium output in the domestic economy Y, and foreign economy Y*. (Enter your answer as a whole number.) G = 10 T = 9 Y = 89 IM = 0.3Y Y* = 89 . EX = 0.3Y* What is the multiplier for each country? Foreign economy: (For the following numerical responses, round your answer to one decimal place.) C* = 11+ 0.7 ( Y* - T') The multiplier for the domestic country is 1.7 . I* = 12 The multiplier for the foreign country is 1.7. G* = 10 Assume that the domestic government, G, has a target T* = 9 level of output of 125. Assuming that the foreign government does not change G*, what is the increase in G IM* = 0.3Y* necessary to achieve the target output in the domestic EX* = 0.3Y economy? The increase in G necessary to achieve the target output in the domestic economy is . (Enter your answer as a whole number.)

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