exam economic

ECMB233 Semester 1' 202 l022 UESTION 1 25 marks (a) Consider a world with only two countries, which are designated the home country (H) and the foreign country (F). Output equals its full-employment level in each country. You are given the following information about each country: Home Cauntry Consumption CH = 100 + 0-5YH 5001'w Investment In = 300 5'30!"W Government Purchases Gn = 155 Full-employment Output '7" = 1000 Foreign Country Consumption CI: = 225 + 0.?YF tSIOL'IrW Investment IF = 250 2001'\" Government Purchases Gr : 190 Full-employment Output YF : 1200 Required: (i) Write national saving AND net export in the home country AND in the foreign country as functions of the world real interest rate, r\". [6 marks] (ii) What is the equilibrium value of the world real interest rate? [2 marks] (iii) What are the equilibrium values of consumption, national saving, investment, the current account balance. AND absorption in each country. [10 marks]