please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly Consider an open economy, where the goods market is in equilibrium when the domestic output equals the domestic and foreign demand for domestic goods.VariableConsumptionInvestmentGovernment spendingBehavioral equations ($)0.65Y+4500.4Y-850r+6004,000Imports0.2Y+ 300Exports0.5Y -725€Taxes0.35YReal exchange rate0.7Foreign output0.45YReal interest rate4%Suppose the real exchange rate increases to 0.75.The new value of net exports is $-72.48. (Round your answer to two decimal places.)

Equilibrium in an Open EconomyIn an open economy, equilibrium is achieved when the domestic output…

Answered: Consider an open economy, where the…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter4: The Aggregate Economy

Section: Chapter Questions

Problem 5E

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If domestic Investment increases, and there is no change in the amount of private and public saving, what must happen to the size of the trade deficit?
Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of 1 of Germanys GDP; private savings is 20 of GDP; and physical investment is 18 of GDP. Based on the national saving and investment identity, what is the current account balance? If the government budget surplus falls to zero, how will this affect the current account balance?
If a country is running a government budget surplus, why is (T - G) on the left side of the saving-investment identity?
Explain briefly whether each of the following would be more likely to lead to a higher level of trade for an economy, or a greater imbalance of trade for an economy. Living In an especially large country Having a domestic investment rate much higher than the domestic savings rate Having many other large economies geographically nearby Having an especially large budget deficit Having countries with a tradition of strong protectionist legislation shutting out imports
State whether each of the following events Involves a financial flow to the Mexican economy or a financial flow out of the Mexican economy: Mexico Imports sen4ces from Japan Mexico exports goods to Canada U.S. investors receive a return from past financial investments in Mexico
Imagine that the U.S. economy finds itself in the following situation: a government budget deficit of 100 billion, total domestic savings of 1,500 billion, and total domestic physical capital investment of 1,600 billion. According to the national saving and Investment Identity, what will be the current account balance? What will be the current account balance if Investment rises by 50 billion, while the budget deficit and national savings remain the same?
If imports exceed exports, is it a trade deficit or a trade surplus? What about if exports exceed imports?
What determines the size of a countrys trade deficit?
If a countrys currency is expected to appreciate in value, what would you think will be the impact of expected exchange rates on yields (e.g., the Interest rate paid on government bonds) in that country? Hint: Think about how expected exchange rate changes and interest rates affect a currencys demand and supply.
Table 23.7 provides some hypothetical data on macroeconomic accounts for three countries represented by A. B, and C and measured in billions of currency units. In Table 23.7, private household saving is SH, tax revenue is T, government spending is G, and investment spending is Calculate the trade balance and the net inflow of foreign saving for each country. State whether each one has a trade surplus or deficit (or balanced trade). State whether each is a net lender or borrower internationally and explain.
When is a trade deficit likely to work out well for an economy? When is it likely to work out poorly?
Explain the relationship between a current account deficit or surplus and the flow of funds.

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