Consider the following classical economy: In this economy, the real interest rate does not deviate from the

Question:

Consider the following classical economy:

In this economy, the real interest rate does not deviate from the foreign interest rate.
a. What are the equilibrium values of the real interest rate, the real exchange rate, consumption, investment, and net exports?
b. Now, suppose that full-employment output increases to 940. What are the equilibrium values of the real interest rate, the real exchange rate, consumption, investment, and net exports?
c. Suppose that full-employment output remains at 940 and that government purchases increase to 132. What are the equilibrium values of the real interest rate, the real exchange rate, consumption, investment, and net exports?

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Begin by writing the equation for the IS curve which is S d I d NX S d Y C d G Y 300 05Y 200r G NX 1...View the full answer

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Question Posted: Apr 01, 2016 03:53 AM

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Consider the following classical economy: In this economy, the real interest rate does not deviate from the

Question:

Desired consumption 300 0.5Y-200. Desired investment Government purchases G 100. Net exports Real exchange rate Full-employment output Y=900. pi 200-300r. NX-150-0.1Y-0.5e. 20 + 6007. e

Step by Step Answer:

Begin by writing the equation for the IS curve which is S d I d NX S d Y C d G Y 300 05Y 200r G NX 1...View the full answer

Macroeconomics

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