Question 3 (i) Explain the relationship between the current account balance given by exports (X) minus imports (M) and the following four variables: private investment (I), private savings (S), Taxes (T) and government expenditure on goods and services (G). (ii) Explain the difference between a closed economy fiscal multiplier and an open economy fiscal multiplier giving the appropriate equations. In both cases incorporate a government sector with an income tax rate given by t. (iii)Explain what is meant by the current account multiplier in relation to a fiscal expansion, giving the appropriate equation.

Question 3 (i) Explain the relationship between the current account balance given by exports (X) minus imports (M) and the following four variables: private investment (I), private savings (S), Taxes (T) and government expenditure on goods and services (G). (ii) Explain the difference between a closed economy fiscal multiplier and an open economy fiscal multiplier giving the appropriate equations. In both cases incorporate a government sector with an income tax rate given by t. (iii)Explain what is meant by the current account multiplier in relation to a fiscal expansion, giving the appropriate equation.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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