In the open-economy goods market, let DD = C + I + G and

ZZ = C + I + G + X - Q

Assume e = 1 and define net exports as NX = X - Q

1.Draw DD and ZZ lines, together with a 45 degree line, to show goods-market equilibrium with balanced trade, i.e. with NX = 0. On a separate graph, show net exports (NX) as a function of output (Y). Clearly label the axes in both graphs.

2.Draw DD and ZZ lines, together with a 45 degree line, to show goods-market equilibrium with balanced trade, i.e. with NX > 0. On a separate graph, show net exports (NX) as a function of output (Y). Clearly label the axes in both graphs.

3.Draw DD and ZZ lines, together with a 45 degree line, to show goods-market equilibrium with balanced trade, i.e. with NX < 0. On a separate graph, show net exports (NX) as a function of output (Y). Clearly label the axes in both graphs.

4.Net Exports (NX) depend on the real exchange rate (e). Start from the initial goods-market equilibrium that you have shown in part (2) and suppose that e decreases, i.e. the real exchange rate appreciates. Assume that the Marshall-Lerner condition holds. Draw new graphs to show what DD, ZZ and NX lines.

5.Start from the initial goods-market equilibrium that you have shown in part (3) and suppose that e increases, i.e. the real exchange rate depreciates. Assume that the Marshall-Lener condition holds. Draw new graphs to show what happens to DD, ZZ and NX lines.