° Consider the following Open Economy with the following parameters, in billions: Consumption (C) = 500 + .75(Yo). Government Spending (G) = 800. Personal Disposable Income (YD) = Y - T + TR Transfers (TR) = 400. Taxes (T) = (1/3)Y. Investment (I) = 400. Exports (X) = 200. In this Economy, Equilibrium Income is Spending/Investment Multiplier is Imports (IM) = 400. the Government Budget is and the Government Select one: a. 3600 billion, balanced, 2 b. 6000 billion, Surplus of 600 billion, 4 c. 3600 billion, Surplus of 80 billion, 4 d. 4500 billion, Surplus of 100 billion, 2.5 e. 2600, Deficit of 333 billion, 4

Question 17 In early 2000, China was the fastest emerging economy in Asia. However, in recent years, China has indicated deteriorating growth beginning of 2020. Suppose consumption function for China is C = 250 +0.6(Y-T) and taxes are T = 15+0.05Y, meanwhile investment is 250, government outlays are 400, and net - export is 300. a) What is the multiplier value for China? b) Suppose China's investment has dropped to 200, government outlays received deduction from the budget by 25% and other components are ceteris paribus. Calculate the national equilibrium new national income equilibrium. c) From the changes that happened in (b) China has reaccelerated export and import activities. This sector has contributed another $100 for net-export, meanwhile other components are ceteris paribus. Calculate national income equilibrium using multiplier approaches.

C= 26 +0.75Y = 60 X = 24 M = 10 (Advanced analysis) The equations give information for a private open economy. The letters Y, C, I, X, and M stand for GDP, consumption, gross investment, exports, and imports, respectively. Figures are in billions of dollars. The multiplier for the economy is 4.6. 3.33. 5.0. 4.0.

Write the Total Spend equivalence in an open and governmental economy. (Variables will be written with their names, not abbreviations)

Question 1

Exercise 2 Consider a small open economy. Assume that GDP (Y) is 5000. Consumption (C) is given by the equation C = 1000 + 0.25(Y-T). Investment (1) is given by the equation I = 1500 – 50r, where r is the real interest rate in percentage points. The world interest rate is actually 5% (r*-5). Taxes (T) are 1000 and government spending (G) is 1500. Net exports are given by the equation NX=500-250E. 1. Compute the equilibrium real exchange rate. Is the Purchasing Power Parity assumption respected? Suppose that prices in the home currency are ten times smaller than prices in the dominant foreing currency. Which is the nominal exchange rate? 2. Is the government budget in surplus or deficit? For each of the possible policy tools to achieve a balanced budget, compute the equilibrium exchange rate and represent it graphically. Interpret your results. 3. Suppose T and G at their initial values (1000 and 1500). Suppose there is a shift in the global supply of funds, so that the new world…

In the country of Borealis, the minimum amount of consumption spending that will occur is $300 - that is, no matter what level of income households have, the aggregate amount of consumption spending in the economy will be at least $300. In addition, for every extra dollar of national income, consumption spending will increase by $0.75.

(a) Assume that Gross Domestic Product (GDP)/Total output (Y) is 6,000. Consumption (C) is given by the equation C = 600 + 0.6(Y – T) where T is the tax. Investment (I) is given by the equation I = 2,000 – 100r, where r is the real rate of interest, in percent. Taxes (T) are 500, and government spending (G) is also 500. What are the equilibrium values of C, I, and r?

Hand written solutions are strictly prohibited

Output (Y): 10,000 Government Spending (G): 1,500 Desired Consumption (C): 8,500 If the goods market is in equilibrium for a closed economy, what is the desired level of investment?