(b) Consider a classical economy. Assume that the GDP of aneconomy is 9000. Consumption is given by the equation C =600+(3/4)YD-40r, where r is the percentage real rate ofinterest. Investment is given by the equation / = 1200-120r. Net exports is given by NX 1500-200€. There is abudget deficit of 500 and government spending is 1500.Finally, suppose the world interest rate is 5.11(i)For this open economy derive all equilibrium values, allsavings values, and also describe whether the currentand capital accounts are in deficit or surplus.

GDP = 9000 C = 600 + (3/4)YD -40r I = 1200 - 120r NX = 1500 - 200e Budget deficit = 500 Government…

Consider a classical economy. Assume that the GDP of an economy is 9000. Consumption is given by the equation C = 600+(3/4)YD-40r, where r is the percentage real rate of interest. Investment is given by the equation / 120r. Net exports is given by NX budget deficit of 500 and government spending is 1500. Finally, suppose the world interest rate is 5. - 1200- - = 1500-200e. There is a (i) For this open economy derive all equilibrium values, all savings values, and also describe whether the current and capital accounts are in deficit or surplus.

Consider a classical economy. Assume that the GDP of an economy is 9000. Consumption is given by the equation C = 600+(3/4)YD-40r, where r is the percentage real rate of interest. Investment is given by the equation / 120r. Net exports is given by NX budget deficit of 500 and government spending is 1500. Finally, suppose the world interest rate is 5. - 1200- - = 1500-200e. There is a (i) For this open economy derive all equilibrium values, all savings values, and also describe whether the current and capital accounts are in deficit or surplus.

MACROECONOMICS

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ISBN:9781337794985

Author:Baumol

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Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

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(b) Consider a classical economy. Assume that the GDP of an
economy is 9000. Consumption is given by the equation C =
600+(3/4)YD-40r, where r is the percentage real rate of
interest. Investment is given by the equation / = 1200-
120r. Net exports is given by NX 1500-200€. There is a
budget deficit of 500 and government spending is 1500.
Finally, suppose the world interest rate is 5.
1
1
(i)
For this open economy derive all equilibrium values, all
savings values, and also describe whether the current
and capital accounts are in deficit or surplus.

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