please help me with 5. 4) This question explores IS and FX equilibria in a numerical example.a.The consumption function is C=1.5+0.8(Y-T). What is the marginal propensity toconsume? What is the marginal propensity to save?b. The trade balance is TB=5(1-[1/E])-0.2(Y-8). What is the marginal propensity toconsume foreign goods? What is the marginal propensity to consume home goods?c. The investment function is I=3-10i. What is investment when the interest rate i isequal to 0.10=10%?d. Assume government spending is G. Add up the four components of demand and writedown the expression for D.e. Assume forex market equilibrium is given by i=([1/E]-1)+0.15, where the two foreignreturn terms on the right are expected depreciation and the foreign interest rate. What isthe foreign interest rate? What is the expected future exchange rate?5) Continuing the last question, solve for the IS curve: obtain an expression for Y in termsof i, G, and T (eliminate E).

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Answered: 4) This question explores IS and FX…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 5. Assume that in a small open economy with full employment, consumption depends only on disposable income. National saving is 300, investment is given by I= 400 – 20r, where r is the real interest rate in percent, and the world interest rate is 10 percent. a. If government spending rises by 100, does investment change? What is the level of investment after the change? Explain your answer. b. Does the trade balance change if G rises by 100? If it changes, does it increase or decrease, and by how much? Explain your answer. c. Does net capital outflow change if G rises by 100? If it changes, does it increase or decrease, and by how much? Explain your answer. d. Use the long-run model of a small open economy in chapter 5 (the model that shows how exchange rate is determined) to illustrate graphically the impact of increasing the government spending on the exchange rate and the trade balance.
Q-3: B. The following graph shows a relationship between saving (S), investment (I) and world interest rate (r*); given that r*> r, where r is domestic interest rate. Graphically show and interpret the impacts of following policy measures on saving (S), investment (I), and net exports (NX):a) Change in fiscal policy at homeb) Change in fiscal policy abroadc) An increase in investment demand
4. In your macroeconomic lectures you are often told that exchange rates and interest rates are important for macroeconomic decision-making. How does an increase in Japan’s government budget deficit affect each of the following? i. The real interest rate in the short run in Japan. Explain. ii. Private domestic investment in plant and equipment in Japan.
1. B. The consumption schedule for an open economy is given as C = 40 + 0.7Y. Assume that planned investment Ig and new exports Nx are independent of the Real GDP and constant, where Ig = 60 and Nx = 20. The equilibrium real output, Y is equal to aggregate expenditures. Calculate the equilibrium level of real GDP for this economy. What happens to the equilibrium Y if Ig changes to 30? What does the new outcome reveal about the size of the multiplier?
3. How reasonable is it for every country to follow policies aimed at increasing net exports?
9. Brazil and Guatemala are trade partners. Brazil's top export is soybeans, whereas Guatemala exports bananas. The initial nominal exchange rate between the two countries is: 1.50 Guatemalan Quetzal (GTQ) = 1 Brazilian Real (BRL). Suppose the exchange rate is now 1.68 GTQ = 1 BRL. What is the effect on the valuation of the GTQ? How does this impact the size of Guatemala's multiplier? What is the change to NX? Select the statement that best summarizes your answer to the questions above: a. Guatemala's currency has appreciated; their multiplier has increased and NX have risen. b. Guatemala's currency has appreciated; their multiplier has increased and NX have fallen. Guatemala's currency has appreciated; their multiplier has decreased and NX have risen. d. Guatemala's currency has appreciated; their multiplier has decreased and NX have fallen. Guatemala's currency has depreciated; their multiplier has increased and NX have risen. f. Guatemala's currency has depreciated; their multiplier…
Sub : EconomicsPls answer very fast.I ll upvote. Thank You a small open economy is described by the following equations: C = 50 + .75(Y-T) I = 200 - 20r NX = 200 -50e M/P = Y -40r G = 200 T = 200 M = 3000 P = 3 r* = 5 a. Derive and graph the IS* and LM* curves. b. Calculate the equilibrium exchange rate, level of income, and net exports c. Assume a floating exchange rate. Calculate what happens to the exchange rate, the level of income, net exports and the money supply if the government increases spending by 50. Use graph to illustrate what you find. d. Now assume fixed exchange rate. Calculate what happens to the exchange rate, the level of income, net exports and the money supply if the government increases spending by 50. Use graph to illustrate what you find.
In your macroeconomic lectures you are often told that exchange rates and interest ratesare important for macroeconomic decision-making.a. How does an increase in Japan’s government budget deficit affect each of thefollowing?
If Investment=f(r*) a. Explain with pictures how it affects the balance of Supply/Saving and Investment Demand if it increases investment demand abroad
True/False and Explain 1. An increase in savings implies a decrease in consumption and therefore a decrease in GDP. 2. The exchange rate between two countries can be thought of as unrelated to any economic variables. 3. If the real rate of return on investment is higher in the US than in Canada, capital will tend to flow out of the US and into Canada. 4. When nominal interest rates are zero, the central bank can still lower them by printing money and purchasing bonds from banks. This increases the supply of loanable funds and stimulates lending. 5. A pro-savings policy by the US would likely reduce the US trade deficit. 6. When savings equals investment, reducing savings and increasing consumption is especially effective in stimulating output. 7. In the dynamic AS-AD model, a perfectly inelastic aggregate supply curve means the central bank cannot control the rate of output growth or the inflation rate. 8. There are an infinite number of combinations of real interest rates and…
Consider an economy described by the following equations: Y=C+I+G+NX Y=10,000 G=3,500 T=2,300 C-600 + 4/5(Y-T) 1=1,100-60r NX-1,800-670€ r.-8. In this economy, private saving = rate public saving investment = national saving the trade balance and the equilibrium exchange. (please enter your answers in numerical value without any dollar sign, comma, or a decimal place.)
Prove that the open economy multiplier is the reciprocal of the sum of marginal propensity to save (MPS) and marginal propensity to import (MPM

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