7. Consider an open economy in which the real exchangerate is fixed and equal to one. Consumption, investment,government spending, and taxes areC - 10 + 0.8(Y – T), 1-10, G=10 and T-10. Imports and exportsgiven byare given byIM = 0.3Y and x - 0.3Y *. The multiplier for this openeconomy isIf we were to close the economy - so exports andimports were identically equal to zero, the multiplier forthe closed economy isThe multiplier for the_(larger / smaller) thanopen economy isthe multiplier for the closed economy because some ofincrease in autonomous expenditure fallson(domestic / foreign) goods.

Value of multiplier for the open economy = 1 / (1 - MPC + MPM) Value of multiplier for the closed…

7. Consider an open economy in which the real exchange rate is fixed and equal to one. Consumption, investment, government spending, and taxes C - 10 + 0.8(Y – T ), 1-10, G-10 and T-10. Imports and exports are given by IM =0.3Y and X - 0.3Y*. The multiplier for this open are given by economy is If we were to close the economy imports were identically equal to zero, the multiplier for the closed economy is so exports and | The multiplier for the _(larger / smaller) than open economy is the multiplier for the closed economy because some of an increase in autonomous expenditure falls on (domestic/ foreign) goods.

7. Consider an open economy in which the real exchange rate is fixed and equal to one. Consumption, investment, government spending, and taxes C - 10 + 0.8(Y – T ), 1-10, G-10 and T-10. Imports and exports are given by IM =0.3Y and X - 0.3Y*. The multiplier for this open are given by economy is If we were to close the economy imports were identically equal to zero, the multiplier for the closed economy is so exports and | The multiplier for the _(larger / smaller) than open economy is the multiplier for the closed economy because some of an increase in autonomous expenditure falls on (domestic/ foreign) goods.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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