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Please show your answer clearly, thanks. 6. Assume now that the countries can credibly commit to coordinate fiscal policies. (a) What is the common change

Please show your answer clearly, thanks.

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6. Assume now that the countries can credibly commit to coordinate fiscal policies. (a) What is the common change in T that achieves the target level of output for both countries? (4 points) (b) What is the common level of the budget deficit, and how does it compare with the level when Home Economy took unilateral action? (2 points) (c) What is the trade balance in each economy with coordinated policy? (2 points) 7. Why is such coordination difficult to achieve in practice? (7 points)Consider the following world that consists of two economies: Home Economy and Foreign Economy. Foreign variables are starred. Assume that both countries either use the same currency, or that the real exchange rate is fixed and normalized to one. C = 10+0.6(YT) I = T G = C T = T Q = 0.11% X = 0.1Y*

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