II. Aggregate expenditure model in an open economy [35 points] Consider an open economy characterized by the following equations. consumption: 0 = 350 + 0.8(Y T) investment: I = 200 government purchases: G = 300 net exports: NX = 150 0.05(Y T) aggregate expenditure: AB = C + I + G + N X In equilibrium, income/output (Y) equals aggregate expenditure (AE) . 1. Suppose the government nances its purchases (G) by scal reserves without raising taxes (i.e., T = 0). (a) [8 points] Compute the equilibrium values of output (Y) , consumption (0) , and net exports (N X ) . (b) Suppose the government wants to achieve exact trade balance (i.e., N X = D). i. [6 points] Does it have to increase or decrease its expenditure (G) and by how much? ii. [3 points] What is the value of the government-expenditure multiplier