3. a. Use the mathematical expression for eqm Y for an open economy (Y=C+I+G+X-IM) to explain what it means when a country is running a trade-balance deficit; that is, its IM> its X. b. Use the expression for Y from the two ways (definitions or formulas) of thinking about Yo. Set this expression for Y equal to that from part a. Then derive the twin-deficit identity and explain what it means for the US, which typically runs trade-balance deficits.

3. a. Use the mathematical expression for eqm Y for an open economy (Y=C+I+G+X-IM) to explain what it means when a country is running a trade-balance deficit; that is, its IM> its X. b. Use the expression for Y from the two ways (definitions or formulas) of thinking about Yo. Set this expression for Y equal to that from part a. Then derive the twin-deficit identity and explain what it means for the US, which typically runs trade-balance deficits.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter19: The International Monetary System: Order Or Disorder

Section: Chapter Questions

Problem 4DQ

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