Economic modelling

True, false, or uncertain Use Model 3 (IS-LM model) to determine the answers. Be sure to explain your answers. a. (8) Increased dependence on international trade makes monetary policy more effective. b. (7) Increased dependence on international trade makes fiscal policy more effective. 4. (15) Many economists argue that China's savings rate is too high. Based on the Solow Model (1G), explain how one could determine whether it was too high or not. Be sure to identify the key factors that would drive such a determination. 5. (15) Characterize points A, B, and C in the graph below. (Characterize means indicate for each market whether it clears, exhibits excess demand, or exhibits excess supply.) I. IS LM B C YUse the following version of the 13-LM model to answer all parts of this question Endogenous Exogenous Consumption: C =200 + .8*Yd Variables Variables Dispoable Income: Yd = Y- T Taxes T = 125+.25*Y C, Yd, T, Y M. G, P, Yf Investment I = 200 - 20*r AD, I, r, NX (foreignY) Net Exports NX =100 - .2*Y-5*r+.1Yf Md Aggregate Demand AD =C+I+G+NX Goods Market Equilibrium Y = AD Money Demand Md=(.5Y -50*r)*P Money Market Equilibrium Md = M Assume Y