Assume output in the U.S. is Q = 100 per year and the world real interest...

 

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Assume output in the U.S. is Q = 100 per year and the world real interest rate is r* = 25.0%. Suppose a hurricane in the southeast temporarily decreases output to 80 in t = 0. Output returns to Q = 100 in period t = 1 and all subsequent periods. (a) If I = G = 0 for all periods and the U.S. is a closed economy, what will consumption and the trade balance be in period t = 0 and subsequent periods be? (b) If I = G = 0 for all periods and the U.S. is an open economy, what will consumption and the trade balance be in period t = 0 and subsequent periods be? Assume output in the U.S. is Q = 100 per year and the world real interest rate is r* = 25.0%. Suppose a hurricane in the southeast temporarily decreases output to 80 in t = 0. Output returns to Q = 100 in period t = 1 and all subsequent periods. (a) If I = G = 0 for all periods and the U.S. is a closed economy, what will consumption and the trade balance be in period t = 0 and subsequent periods be? (b) If I = G = 0 for all periods and the U.S. is an open economy, what will consumption and the trade balance be in period t = 0 and subsequent periods be?

Answer rating: 100% (QA)

aAssuming the US is a closed economy In period t 0 Consumption Q I 100 0 ... View the full answer