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3. Find the values of (TB, E, Ee) in " Equilibrium 0." O 1) @ (0, 1, 1) O 2) 6 (0, 2, 2) O 3) © (2, 1.5, 1.5) O4) @ none of a-c

3. Find the values of (TB, E, Ee) in " Equilibrium 0." O 1) @ (0, 1, 1) O 2) 6 (0, 2, 2) O 3) © (2, 1.5, 1.5) O4) @ none of a-c

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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(Q1-Q3] are based on the initial (Situation 0] below: [Situation 0] • Since LONG AGO, the home country has been in a LR eq'm, where i) PPP holds, i) the expected ER (i.e., E") is equal to the actual spot ER (i.e., E), iii) P = P = 1, Y, = Ypotentiat iv) i = i =5 (%) • Note: interest rates are in % terms, so you need to use i = i' + 100(E /E - 1) • The initial ISo curve is a straight line as shown in the [FIGURE 1_Handout (FINAL) , and its slope (45- degree) is preserved when it shifts. • Consumption: C = Č + MPC x (Y – T), MPC=0.75 • Investment: I depends negatively on nominal interest rate i. • TB= TB +2.5 x (EP"/P)-0.5 x Y, TB, = 0 • Money demand: MD = P x (Y - i+2 + 4), where the money demand shock v is 0. • Money supply: M = 2.
Transcribed Image Text:(Q1-Q3] are based on the initial (Situation 0] below: [Situation 0] • Since LONG AGO, the home country has been in a LR eq'm, where i) PPP holds, i) the expected ER (i.e., E") is equal to the actual spot ER (i.e., E), iii) P = P = 1, Y, = Ypotentiat iv) i = i =5 (%) • Note: interest rates are in % terms, so you need to use i = i' + 100(E /E - 1) • The initial ISo curve is a straight line as shown in the [FIGURE 1_Handout (FINAL) , and its slope (45- degree) is preserved when it shifts. • Consumption: C = Č + MPC x (Y – T), MPC=0.75 • Investment: I depends negatively on nominal interest rate i. • TB= TB +2.5 x (EP"/P)-0.5 x Y, TB, = 0 • Money demand: MD = P x (Y - i+2 + 4), where the money demand shock v is 0. • Money supply: M = 2.
3. Find the values of (TB, E, Ee) in " Equilibrium 0." O 1) @ (0, 1, 1) O 2) 6 (0, 2, 2) O 3) © (2, 1.5, 1.5) O 4) @ none of a-c
Transcribed Image Text:3. Find the values of (TB, E, Ee) in " Equilibrium 0." O 1) @ (0, 1, 1) O 2) 6 (0, 2, 2) O 3) © (2, 1.5, 1.5) O 4) @ none of a-c
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