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IS-LM in an Open Economy Consider the same IS-LM model of the previous question but now in an open economy. Assume that additionally we have that TB=100E-0.36Y+0.2Y* E=1.2 Y = 1,200 1. Derive the IS curve. 2. Derive the LM curve. 3. Determine the equilibrium output Y and interest rate i. 4. Find the equilibrium value for the trade balance. Is this economy experiencing a trade balance surplus or deficit? 5. Assume that the uncovered interest parity holds and that the expected nominal exchange rate

IS-LM in an Open Economy Consider the same IS-LM model of the previous question but now in an open economy. Assume that additionally we have that TB=100E-0.36Y+0.2Y* E=1.2 Y = 1,200 1. Derive the IS curve. 2. Derive the LM curve. 3. Determine the equilibrium output Y and interest rate i. 4. Find the equilibrium value for the trade balance. Is this economy experiencing a trade balance surplus or deficit? 5. Assume that the uncovered interest parity holds and that the expected nominal exchange rate

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter24: The Aggregate Demand/aggregate Supply Model
Section: Chapter Questions
Problem 58CTQ: Are Says law and Keynes law necessarily mutually exclusive?
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IS-LM in an Open Economy Consider the same IS-LM model of the previous question but now in an open economy. Assume that additionally we have that TB=100E-0.36Y+0.2Y* E=1.2 Y = 1,200 1. Derive the IS curve. 2. Derive the LM curve. 3. Determine the equilibrium output Y and interest rate i. 4. Find the equilibrium value for the trade balance. Is this economy experiencing a trade balance surplus or deficit? 5. Assume that the uncovered interest parity holds and that the expected nominal exchange rate
Transcribed Image Text:IS-LM in an Open Economy Consider the same IS-LM model of the previous question but now in an open economy. Assume that additionally we have that TB=100E-0.36Y+0.2Y* E=1.2 Y = 1,200 1. Derive the IS curve. 2. Derive the LM curve. 3. Determine the equilibrium output Y and interest rate i. 4. Find the equilibrium value for the trade balance. Is this economy experiencing a trade balance surplus or deficit? 5. Assume that the uncovered interest parity holds and that the expected nominal exchange rate
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