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Question 5 (14 points). Assume that a large open economy with a oating exchange rate is described in the short run by the equations: C=0.5

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Question 5 (14 points). Assume that a large open economy with a oating exchange rate is described in the short run by the equations: C=0.5 (YT} T= 1,000 I: 1,500250r G= 1,500 NX=1,000250e C+I+G+NX= Y M/P = 0.5Y 500:- M= 1,000 CF = 500 250:- NX= CF The last two equations specify that CF, net capital outow, decreases with r, the interest rate, and that NX, the net exports, is equal to net capital outow. NX is also related to the exchange rate, 3, and falls when 9 appreciates. The price level (P) is xed at 1.0. Calculate short-run equilibrium values of Y, r, C, 1', CF, NX, e, private saving, and public saving

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