Suppose Ghana’s economy is described by the following equations: **Economic Analysis of Ghana's Market Conditions**### Given Identities and Functions- $ Y = C + I + G + NX $ *(Income Identity)*- $ Y = 6,000 $ *(Income)*- $ G = 1,200 $ *(Government expenditure)*- $ T = 1,000 $ *(Tax)*- $ C = 250 + 0.75(Y - T) $ *(Consumption expenditure function)*- $ I = 1,000 - 100r $ *(Investment function)*- $ NX = 400 - 400e $ *(Net exports function)*- $ r = r^* = 5 $ *(Interest rate)*### Tasks#### (a) Solve for:**(i) The National Saving****(ii) The Trade Balance****(iii) The Equilibrium Exchange Rate****(iv) Based on your answer in (iii) would you describe Ghana as a net borrower or a net lender and why?**#### (b) Clearly explain the effect on investment and trade balance in a small open economy like Ghana if most foreign governments decide to embark on fiscal expansion.#### (c) With the aid of a diagram, explain the effect on saving and trade balance in a small economy like Ghana if the government embarks on fiscal expansion.#### (d) Analyse the effect on interest rate, investment, and trade balance in a small open economy like Ghana if foreign governments in North America, Australia, Asia, and the European Union (EU) embark on expansionary fiscal policy.### Detailed Explanation of Given Functions and Variables1. **Income Identity (Y = C + I + G + NX)**: - This equation represents the aggregate demand (AD) in an open economy where: - $ Y $ is the national income or Gross Domestic Product (GDP). - $ C $ is the consumption expenditure. - $ I $ is the investment expenditure. - $ G $ is the government expenditure. - $ NX $ is the net exports (exports minus imports).2. **Consumption Expenditure Function ($ C = 250 + 0.75(Y - T) $**): - This function indicates the relationship between consumption and income. - $ 250 $ is the autonomous consumption. - $ 0.75 $ is the marginal

Since you have posted a question with multiple parts, we will solve the first three sub-parts for…

Y =C+I+G+NX Y = 6,000 G = 1,200 T =1,000 C = 250+0.75(Y –T) 1 = 1,000 – 100r (Income Identity) (Income) (Government expenditure) (Тах) (Consumption expenditure function (Investment function) (Net exports function) (Interest rate) NX = 400 – 400ɛ r=r* =5 (a) Solve for (1) The National saving (ii) The trade baance (iii) The equilibrium exchange rate.

Y =C+I+G+NX Y = 6,000 G = 1,200 T =1,000 C = 250+0.75(Y –T) 1 = 1,000 – 100r (Income Identity) (Income) (Government expenditure) (Тах) (Consumption expenditure function (Investment function) (Net exports function) (Interest rate) NX = 400 – 400ɛ r=r* =5 (a) Solve for (1) The National saving (ii) The trade baance (iii) The equilibrium exchange rate.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: ou looked at many economic indicators, including data regarding unemployment, GDP, housing starts,…

A: Answer- Need to find- You looked at many economic indicators, including data regarding unemployment,…

Q: Two key macroeconomic indicators that provide insight into the standard of living in an country are:…

A: Answer: Standard of living is generally measured by the amount of goods and services available to…

Q: An economy has three sectors: manufacturing, underwater basket weaving, and energy. Manufacturing…

A: The manufacturing unit sells 30% of its output to underwater basket weaving. It uses 30% of its…

Q: Which of the following best defines aggregate demand? It is the total amount spent by all consumers,…

A: National income refers to the total amount of money earned within a nation.

Q: Maria moved from Chicago to Colorado in November 2020. She paid $1,200 to the professional moving…

A: Gross domestic product measures the market value of all final goods and sevices produced in an…

Q: In 2010, the nominal GDP of some country was 35G$. In 2020, the GDP of that country was 52G$.…

A: Here we calculate the Real GDP by using the given information and correct the answer so the…

Q: Below is economic data for Germany for 2016 (measured in billions of current euros). What was total…

A: Total Spending is known to be as the spending which mainly means that when a person spend money for…

Q: To answer Questions #1 through #4 use the following information: Suppose that in the nation state of…

A: The GDP deflator is a measure of the price level of all new, domestically produced final products…

Q: According to the East Asia and Pacific Economic Update published by the World Bank in April 2015,…

A: 1. A) A global economic recovery increasing China's exports means higher foreign demand for Chinese…

Q: Assume that you are told a country’s nominal GDP decreased from one year to the next. All of the…

A: Gross domestic product (GDP) that hasn't been adjusted for inflation is referred to as nominal GDP.…

Q: Recessions hit parts of the economy differently. What part of the economy is usually hurt the…

A: Introduction A recession is a substantial slowdown or decline in economic activity. Generally, a…

Q: The following table contains data on the fictional country of Penguinia. Presented are the country's…

A: Formula for Real GDP Real GDP = Nominal GDPGDP CHAIN PRICE INDEX×100 Calculating the values of the…

Q: It is expected that in the next twenty years the gross domestic product of China will become larger…

A: While comparing the GDP in both countries, China becomes larger than the United States. This means…

Q: Based on the GDP information in the table below for 2 countries: Country A Country B GDP per…

A: A developed economy is one that is found in a developed country with a high level of economic growth…

Q: South Africa has a GDP of $10 billion (measured in U.S. dollars) and a population of 45 million.…

A: South Africa has a GDP of $10 billion (measured in U.S. dollars) and a population of 45 million. GDP…

Q: The Bureau of Economic Analysis has recently released the following information for the most recent…

Q: Why do you think most western countries GDP has not grown as fast as China's GDP over the last 10…

A: The gross domestic product (GDP) is a monetary measure of the market value of all final products and…

Q: The exports of Uruguay, a developing country, are made essentially of primary commodities. A…

A: Income terms of trade will be computed as net barter terms of trade of a nation multiplied by its…

Q: a technological advancement in sector “ X” of the economy affect the number of people who work in…

A: Technology advancement create various changes in the labour force. Sometimes it create more job…

Question

Suppose Ghana’s economy is described by the following equations:

**Economic Analysis of Ghana's Market Conditions**

### Given Identities and Functions
- $ Y = C + I + G + NX $ *(Income Identity)*
- $ Y = 6,000 $ *(Income)*
- $ G = 1,200 $ *(Government expenditure)*
- $ T = 1,000 $ *(Tax)*
- $ C = 250 + 0.75(Y - T) $ *(Consumption expenditure function)*
- $ I = 1,000 - 100r $ *(Investment function)*
- $ NX = 400 - 400e $ *(Net exports function)*
- $ r = r^* = 5 $ *(Interest rate)*

### Tasks

#### (a) Solve for:

**(i) The National Saving**
**(ii) The Trade Balance**
**(iii) The Equilibrium Exchange Rate**
**(iv) Based on your answer in (iii) would you describe Ghana as a net borrower or a net lender and why?**

#### (b) Clearly explain the effect on investment and trade balance in a small open economy like Ghana if most foreign governments decide to embark on fiscal expansion.

#### (c) With the aid of a diagram, explain the effect on saving and trade balance in a small economy like Ghana if the government embarks on fiscal expansion.

#### (d) Analyse the effect on interest rate, investment, and trade balance in a small open economy like Ghana if foreign governments in North America, Australia, Asia, and the European Union (EU) embark on expansionary fiscal policy.

### Detailed Explanation of Given Functions and Variables

1. **Income Identity (Y = C + I + G + NX)**:
- This equation represents the aggregate demand (AD) in an open economy where:
- $ Y $ is the national income or Gross Domestic Product (GDP).
- $ C $ is the consumption expenditure.
- $ I $ is the investment expenditure.
- $ G $ is the government expenditure.
- $ NX $ is the net exports (exports minus imports).

2. **Consumption Expenditure Function ($ C = 250 + 0.75(Y - T) $**):
- This function indicates the relationship between consumption and income.
- $ 250 $ is the autonomous consumption.
- $ 0.75 $ is the marginal

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Stagflation and recession are increasingly being used to describe where the economy might be headed. The World Bank warned on 14th June 2022, that global economies were at risk of stagflation if not recession. "The world economy is again in danger," David Malpass, president of the World Bank, said in the latest edition of the Global Economic Prospects report. "It is facing high inflation and slow growth at the same time. Even if a global recession is averted, the pain of stagflation could persist for several years - unless major supply increases are set in motion. Explain the main differences between stagflation and recession, if we had to face one, which one would be less painful?
Analyse the different components of the business cycles
The country described in the table below produces and consumes only three goods: T- shirts, shampoo, and bread. Assuming that 2018 is the base year, by what percentage did real GDP grow between 2018 and 2019? (If your answer is 23.23%, please write 23.23) T-shirts Shampoo Bread 2018 Quantity Unit 10 units 20 bottles 30 kilograms Typed nuleric answer will be automatically saved. Price Quantity 40 10 9 2019 Unit 20 units 10 bottles 25 kilograms Price 45 18 20 C
The following table shows hypothetical values for the real GDP and population for the United States, Japan, Brazil, and Germany in 2016. Complete the table by calculating the real GDP per capita for each country. Instructions: Enter your answers as a whole number. Real GDP and Population, 2016: Select Countries Country United States Japan Brazil Germany Real GDP (millions of Population (millions of dollars) $14,059,255 4,199,260 1,709,488 2,958,902 people) 287 117 186 77 Real GDP per Capita (dollars) $
To answer Questions #1 through #4 use the following information: Suppose that in the nation state of Raleighville there are 2 final goods produced in the economy - dog food and kitten chow. Suppose the economy produces 15 units of dog food and 5 units of kitten chow in 2000 (the base year), and 20 units of dog food and 10 units of kitten chow in 2020. Further suppose the price of dog food was $1.00 per unit in 2000, and $3.00 per unit in 2020; whereas the price of kitten chow was $1.00 in 2000 and $2.50 in 2020. What was the real GDP for Raleighville in 2020? Oa. $20.00 O b. $30.00 Oc. $57.50 Od. $85.00 Next page page
What happens to each sector of the economy when recession occurs?
To answer Questions #1 through #4 use the following information: Suppose that in the nation state of Raleighville there are 2 final goods produced in the economy - dog food and kitten chow. Suppose the economy produces 15 units of dog food and 5 units of kitten chow in 2000 (the base year), and 20 units of dog food and 10 units of kitten chow in 2020. Further suppose the price of dog food was $1.00 per unit in 2000, and $3.00 per unit in 2020; whereas the price of kitten chow was $1.00 in 2000 and $2.50 in 2020. What was the real GDP for Raleighville in 2000? O a. $20.00 O b. $30.00 O c. $57.50 O d. $85.00 Next page
Which of the following indicators is used to measure the overall level of prices for goods and services in an economy over a period of time? Options: A) Gross Domestic Product (GDP) B) Consumer Price Index ( CPI) C) Unemployment rate D) Balance of trade
In the US, the Bureau of Economic Analysis (BEA) reports the following information about the US economy for the years 2010 - 2016. All dollar figures are in trillions and have been rounded to the nearest trillion. Some entries are missing from the table. Let's see if you can figure out one of these missing values. 2010 2011 2012 2013 2014 2015 2016 Current-dollar GDP 15.0 15.5 16.2 16.8 17.5 18.2 18.7 GDP in chained 2012 dollars 15.8 16.5 16.9 17.7 chained growth rate of GDP (%) 2.6 1.6 2.5 2.9 1.6 What was real GDP in 2015? a) 16.9 x 1.029 = 17.4b) 16.9 x 1.025 = 17.3c) (16.9 + 17.7)/2 = 17.3d) 17.5 x 1.029 = 18.0
Which of the following will likely lead to an increase in real GDP in the U.S. Group of answer choices The U.S. begins a new war in the middle east A massive hurricane destroys homes and infrastructure in the Eastern US The growing student debt burden forces American households to begin working twice as many hours each week all of the above Many people believe that GDP is not a good indicator of economics success or standard of living because Group of answer choices GDP doesn't tell us anything about the distribution of income GDP doesn't include leisure time as a good GDP does not account for "bads" like pollution all of the above
Consider the following data for a particular economy:GDPmp = 950Private consumption = 750Gross investment = 100Net investment = 80Exports = 250Imports = 300Net Indirect taxes = 50Net external income = 100Balance of transfers with the Rest of the World = 50Private savings = 300Calculate:a) NNPbp (Net National Product). b) Current balance. Interpret the result obtained.
Confused on how to answer