An economy has zero net exports. Otherwise, it is identical to the economy described in Problem 7.
Question:
a. Find short-run equilibrium output.
b. Economic recovery abroad increases the demand for the country's exports; as a result, NX rises to 100. What happens to short-run equilibrium output?
c. Repeat part b, but this time assume that foreign economies are slowing, reducing the demand for the country's exports, so that NX = —100. (A negative value of net exports means that exports are less than imports.)
d. How do your results help to explain the tendency of recessions and expan¬sions to spread across countries?
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