Question
don't use Al bot or chat GPT otherwise downvote.correct answer will get instant upvote show calculation Consider an open economy described by the following equations
don't use Al bot or chat GPT otherwise downvote.correct answer will get instant upvote show calculation
Consider an open economy described by the following equations and the Mundell- Fleming model of an open economy.
G = 2,500
T = 2,000
C = 500 + 0.75(Y - T)
I = 900 - 50r
NX = 1,500 - 250e
M / P = Y - 40r
M = 3000
P = 3
r = r* = 5
a) Derive the IS* and LM* curves.
b) Calculate the equilibrium exchange rate, income, and net exports.
c) Assume a floating exchange rate. Calculate what happens to the exchange rate, income, net exports and money supply if the government increases expending by 500.
d ) Now, assume a fixed exchange rate. Calculate what happens to the exchange rate, income, net exports, and the money supply if the government increases expending by 500.
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