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E. (20%} Consider the following shortrun model of an open economy: Y = C+I+G+Nx C = 40+0.6(YT) I = 100 1 NA? = XEIM x

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E. (20%} Consider the following shortrun model of an open economy: Y = C+I+G+Nx C = 40+0.6(YT) I = 100 1 NA? = XEIM x 1400 _ E [M = EY Domestic and foreign prices are constant with P = P\" = 1. Thus, the real exchange rate is equal to the nominal rate E. The poliey makers want to achieve the following targets for output, consumption and net exports: YT = SUD, CT 2 28(1 and NXT = D. Show how these targets can he achieved using government consumption [6'], taxes {T} and the exchange rate {E} as policy instruments

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