Consider and economy described by the following equations: Y = C+I+G+ NX Y = 10000 G= 2000 T= 1500 C= 300 + .7 (Y-T) I= 500 – 25r NX = 1000 - 1000€ 1=r* = 6 a) In this economy, solve for national savings, investment, the trade balance, and the equilibrium exchange rate. b) Suppose now that G falls to 1,500. Solve for national savings, investment, the trade balance, and the equilibrium exchange rate. c) Now suppose the world interest rate falls from 6 percent to 5 percent. G is again 2000. Solve for national savings, investment, the trade balance, and the equilibrium exchange rate.

Consider and economy described by the following equations: Y = C+I+G+ NX Y = 10000 G= 2000 T= 1500 C= 300 + .7 (Y-T) I= 500 – 25r NX = 1000 - 1000€ 1=r* = 6 a) In this economy, solve for national savings, investment, the trade balance, and the equilibrium exchange rate. b) Suppose now that G falls to 1,500. Solve for national savings, investment, the trade balance, and the equilibrium exchange rate. c) Now suppose the world interest rate falls from 6 percent to 5 percent. G is again 2000. Solve for national savings, investment, the trade balance, and the equilibrium exchange rate.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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