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give explanation please, you can give a part of the answer, it is not necessary to answer all of it. Consider an economy characterized by

give explanation please, you can give a part of the answer, it is not necessary to answer all of it.

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Consider an economy characterized by the following equations: 0 = 60+0.7(YT) IP = 80 = 400 140 0 0 170 0 = 0.03 :UHHNEQN where C' is (private) consumption, Y is aggregate output, T is exogenous (lump sum) taxes, I P is planned (private) investment, K is the capital stock, G is government expenditure, M is imports, X is exports, t is the income tax rate, and R is the economywide real interest rate. a) Calculate the multiplier. (3 points) b) Find shortrun equilibrium output. (3 points) 0) An economic boom abroad increases the demand for the domestic country's exports; as a result, X rises to 30. What happens to shortrun equilibrium output? (4 points) (1) Repeat part (b), but this time assume that foreign economies are slowing, re- ducing the demand for the country's exports, while the domestic demand for imports increases so that N X = 30. (2 points) e) How do your results help to explain the tendency of recessions and expansions to spread across countries? (3 points) f) Now assume that the marginal propensity to import is 0.1 and the income tax rate is 0.3. Furthermore assume again that X = M = 0 and exogenous taxes are equal to 30. O, I P , and G are unchanged. The capital stock increases to K = 500 and the interest rate rises from 0.03 to 0.04. Calculate the multiplier. (3 points)

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