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Here is the question. Consider an sconorny characterized by the following equations: 60 + {LT-{Y T] 30 400 140 0 0 170 0 1' 0.03

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Here is the question.

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Consider an sconorny characterized by the following equations: 60 + {LT-{Y T] 30 400 140 0 0 170 0 1' 0.03 II II mussseeh'un n Where C' is (private) consumption, Y is aggregate output, T is exogenous (lump sum} taxes, l"F is planned {private} investment, If is the capital stock, G is gmiernment expenditure, M is imports, X is exports, r is the income tax rate, and R is the econonnr-wide res! interest rate. a) Calculate the multipher. (3 points) b) Find short-run equilibrium output. (3 points} c) An economic boom abroad increasa the demand for the domestic country's experts; as a result, X rises to 30. What happens to shortnrun equilibrium output? (4 points) d] Repeat part (b), but this time assume that foreign economies are slowing, re- ducing the demand for the muntry's exports, while the domestic demand for imports increases so that NX = 30. (2 points) e) How do your results help to explain the tendency of recessions and expansions to spread aemss emmtries? (3 points) f) Now assume that the nmrginal propensity to import is 0.1 and the income tax rate is {3.3. Enthermore assume again that X = M = and exogenous taxes are equal to 30. 0, IF, and G are michauged. The capital stock increases to K = 500 and the interest rate rism from 0.03 to 0.04. Calculate the multiplier. {3 points)

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