Question
You are provided the following information about your economy: CONSUMPTION, C=200+0.6Yd TAX, t=0.1Y INVESTMENT, I=25, Page 5 of 5 GOVERNMENT, G=800, EXPORTS, X=200 IMPORTS, M=100+0.2Y,
You are provided the following information about your economy: CONSUMPTION, C=200+0.6Yd TAX, t=0.1Y INVESTMENT, I=25, Page 5 of 5 GOVERNMENT, G=800, EXPORTS, X=200 IMPORTS, M=100+0.2Y, Required: A. Calculate equilibrium income and the multiplier for your economy. [10 marks] B. Calculate the change in equilibrium income following an increase in exports by 100 [5 marks] C. Discuss the advantages of free trade [5 marks] D. Discuss the effect of the increase in exports on the supply of foreign currency, and consequently the exchange rate. What other factors have the same effect on the exchange rate. [5 marks] [Total: 25 Mark
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