Assume the following economic structure (similar to an open economy, which we discussed in the class, butwith numerical values):C = 50 + 0.75 (Y - T)I= 200 - 20*rNX = 200 - 50*REERMP(d) = Y - 40*r(d)r(d) = r(f) + AREERG = T= 200, M = 3,000, P(d) = 3, r(f) = foreign real interest rate = 5%, and REER = real%3Dexchange rate (P(d)/E P() where P(d) = domestic price level, E = nominal exchange rate(AE > 0 depreciating against foreign currencies), and P(f) = foreign price level = 1. The initialsteady state AREER = 0. Answer the following questions:a. Using the above information, derive solutions for steady-state REER, Y, r(d), and NXHint: use money market condition to solve for Y first, and then IS curve to solve forREER.].b. Assume that government spending increases by AG = 50 (without increase intaxation). Calculate changes to REER, Y, NX, and M, if the exchange rate is floating.c. Assume that government spending increases by AG = 50 (with an increase in taxes tobalance the budget). How would that impact your answers to part (b), if the exchangerate is floating?d. Assume that government spending increases by AG = 50 (without changes intaxation). Calculate what happens to exchange rate, income, net exports, and moneysupply if the exchange rate is fixed. [Hint: M is now endogenous and determined bymoney market equilibrium.]e. Assume that international interest rates, r(f) rise by 100 basis points. With theexchange rate floating, how will this impact Y, REER, and NX?

We are supposed to do one question at a time kindly repost the question to get other solved .

Assume the following economic structure (similar to an open economy, which we discussed in the class, but with numerical values): C= 50 + 0.75 (Y - T) I= 200 - 20*r NX = 200 - 50*REER M P(d) = Y - 40*r(d) r(d) = r(f) + AREER G=T= 200, M = 3,000, P(d) = S, r(f) = foreign real interest rate = 5%, and REER = real exchange rate (P(d)E P() where P(d) = domestic price level, E = nominal exchange rate (AE >0 depreciating against foreign currencies), and P(f) = foreign price level = 1. The initial steady state AREER = 0. Answer the following questions: a. Using the above information, derive solutions for steady-state REER, Y, r(d), and NX [Hint: use money market condition to solve for Y first, and then IS curve to solve for REER.].

Assume the following economic structure (similar to an open economy, which we discussed in the class, but with numerical values): C= 50 + 0.75 (Y - T) I= 200 - 20r NX = 200 - 50REER M P(d) = Y - 40*r(d) r(d) = r(f) + AREER G=T= 200, M = 3,000, P(d) = S, r(f) = foreign real interest rate = 5%, and REER = real exchange rate (P(d)E P() where P(d) = domestic price level, E = nominal exchange rate (AE >0 depreciating against foreign currencies), and P(f) = foreign price level = 1. The initial steady state AREER = 0. Answer the following questions: a. Using the above information, derive solutions for steady-state REER, Y, r(d), and NX [Hint: use money market condition to solve for Y first, and then IS curve to solve for REER.].

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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