Consider the following model of a small open economy: Y = 1000-s -1000i + 5e i...
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Consider the following model of a small open economy: Y = 1000-s -1000i + 5e² i = 0.5 (1+s) + 0.001Y - 0.005 i = if = 0.02 (1) (2) (3) IS Equation LM Equation BP = 0 locus Let foreign prices be fixed at Pf= 1 and the nominal exchange rate e be flexible. Assume that this is a Keynesian fixed-price economy with P= P = 1. Using this model and assuming: No shock s = 0, and benchmark nominal money supply M = M = 500, Solve for Y*. Give your answers to 5 decimal places. Using the same model in and assuming: With shocks = 0.4, and quantitative easing that increases nominal money supply M = M = 550 Solve for Y*. Give your answers to 5 decimal places. Consider the following model of a small open economy: Y = 1000-s -1000i + 5e² i = 0.5 (1+s) + 0.001Y - 0.005 i = if = 0.02 (1) (2) (3) IS Equation LM Equation BP = 0 locus Let foreign prices be fixed at Pf= 1 and the nominal exchange rate e be flexible. Assume that this is a Keynesian fixed-price economy with P= P = 1. Using this model and assuming: No shock s = 0, and benchmark nominal money supply M = M = 500, Solve for Y*. Give your answers to 5 decimal places. Using the same model in and assuming: With shocks = 0.4, and quantitative easing that increases nominal money supply M = M = 550 Solve for Y*. Give your answers to 5 decimal places.
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