An open economy with absolute mobility of capital is described as follows: consumption function is given as C = 50 +0,8(Y-T), where Y is output, and I is net taxes. Investment function is given as I = 20-10i, where I is nominal interest rate. Government spending G = 20, tax Tx= 10, export Ex = 6E+10, import Im = 22-4E+0,3Y where E-nominal exchange rate (price of foreign currency in terms of domestic currency). For one unit of foreign currency, you can get 3 units of domestic currency. The real money supply is M³/P = 50. The demand for real money is described by the following function: L(Y, i) = 0, 5Y-10i. Find BP curve, if the economy is initially in the internal and external equilibrium. Write an equation for BP without spaces and signs

An open economy with absolute mobility of capital is described as follows: consumption function is given as C = 50 +0,8(Y-T), where Y is output, and I is net taxes. Investment function is given as I = 20-10i, where I is nominal interest rate. Government spending G = 20, tax Tx= 10, export Ex = 6E+10, import Im = 22-4E+0,3Y where E-nominal exchange rate (price of foreign currency in terms of domestic currency). For one unit of foreign currency, you can get 3 units of domestic currency. The real money supply is M³/P = 50. The demand for real money is described by the following function: L(Y, i) = 0, 5Y-10i. Find BP curve, if the economy is initially in the internal and external equilibrium. Write an equation for BP without spaces and signs

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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