Suppose desired consumption C", investment, /", net exports, NX, and the demand for monetary assets, M", for the small open economy of Swedeway can be represented as Cd = 100 + 0.6Y %3D Id = 80 – 400r Md = 0.5Y – 0.3(r + n°) + z NX = 200 – 0.3Y – 10e where Y denotes GDP, r'denotes the domestic real interest rate,eis the real exchange rate andPis the domestic price level. Swedeway operates a flexible nominal exchange rate regime. Government spending is given byG = 100, the money supply isM = 100and expected inflation is T° rFor = 0.03and the foreign price level isPFor 0.02. The foreign real interest rate is 1. The full employment level of output is Y 500. %3D In the short run, Swedeway's output and real exchange rate are now given by Y = 493.33; e = 12.4 %3D %3D Y = 495.00; e = 26.6 Y = 496.67; e = 7.83. Y = 496.00; e = 12.1

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z=5
Suppose desired consumption C“, investment, I", net exports, NX, and the
demand for monetary assets, M", for the small open economy of Swedeway can be
represented as
Cd = 100 + 0.6Y
%3D
Id = 80 – 400r
Md
= 0.5Y- 0.3(r + n°) + z
NX = 200 – 0.3Y – 10e
where Y denotes GDP, rdenotes the domestic real interest rate,eis the real exchange
rate andPis the domestic price level. Swedeway operates a flexible nominal
exchange rate regime.
100and
Government spending is given byG = 100, the money supply isM
0.02. The foreign real interest rate is
expected inflation is T°
rFor
:0.03and the foreign price level isPFor
1. The full employment level
of output is Y = 500.
%D
In the short run, Swedeway's output and real exchange rate are now given by
Y = 493.33; e
= 12.4
Y = 495.00; e = 26.6
Y = 496.67; e = 7.83.
Y = 496.00; e = 12.1
Transcribed Image Text:z=5 Suppose desired consumption C“, investment, I", net exports, NX, and the demand for monetary assets, M", for the small open economy of Swedeway can be represented as Cd = 100 + 0.6Y %3D Id = 80 – 400r Md = 0.5Y- 0.3(r + n°) + z NX = 200 – 0.3Y – 10e where Y denotes GDP, rdenotes the domestic real interest rate,eis the real exchange rate andPis the domestic price level. Swedeway operates a flexible nominal exchange rate regime. 100and Government spending is given byG = 100, the money supply isM 0.02. The foreign real interest rate is expected inflation is T° rFor :0.03and the foreign price level isPFor 1. The full employment level of output is Y = 500. %D In the short run, Swedeway's output and real exchange rate are now given by Y = 493.33; e = 12.4 Y = 495.00; e = 26.6 Y = 496.67; e = 7.83. Y = 496.00; e = 12.1
What is the change in net exports, ANX, in the short run?
ANX = -2,50
ANX = –2.67
ANX = –1.60
|3D
ANX = -1,67
%3D
In the new GE, Swedeway's domestic price level and real exchange rate are given by
P = 0.490; e = 26.0
P = 0.392; e = 11.8
P = 0.649; e = 12.0
P = 0.395; e = 7.60
In the new GE, the nominal exchange rate, enom, is given by
enom =
= 53.0
enom = 19.3
епот — 30.1
enom =
= 18.5
Transcribed Image Text:What is the change in net exports, ANX, in the short run? ANX = -2,50 ANX = –2.67 ANX = –1.60 |3D ANX = -1,67 %3D In the new GE, Swedeway's domestic price level and real exchange rate are given by P = 0.490; e = 26.0 P = 0.392; e = 11.8 P = 0.649; e = 12.0 P = 0.395; e = 7.60 In the new GE, the nominal exchange rate, enom, is given by enom = = 53.0 enom = 19.3 епот — 30.1 enom = = 18.5
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