. Suppose the country of Croatia, a small open economy can be described by the following...

 

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. Suppose the country of Croatia, a small open economy can be described by the following equations: Y=C+I+G + NX Y = 12,500 G = 3,750 T = 3,500 C = 1200+ 0.8(Y-T) I= 1500 - 240r NX 780-500€ r=r* = 4 (a) For this economy calculate (i) national savings (ii) level of investment (iii) net exports (iv) equilibrium exchange rate b. Suppose that Croatia increases its taxes (T). Illustrate graphically the effects of this fiscal policy using the model of the small open economy. Use the model with real exchange rate and net exports on the axes. In your graph clearly label your axis and curves. Label the initial equilibrium as Point "A" and the new equilibrium as Point "B". c. Suppose we know the magnitude of the increase in taxes in Croatia. Assume that taxes (T) rises to 4,000. Solve numerically for (i) national savings, (ii) investment, (iii) the trade balance, and (iv) the equilibrium exchange rate. . Suppose the country of Croatia, a small open economy can be described by the following equations: Y=C+I+G + NX Y = 12,500 G = 3,750 T = 3,500 C = 1200+ 0.8(Y-T) I= 1500 - 240r NX 780-500€ r=r* = 4 (a) For this economy calculate (i) national savings (ii) level of investment (iii) net exports (iv) equilibrium exchange rate b. Suppose that Croatia increases its taxes (T). Illustrate graphically the effects of this fiscal policy using the model of the small open economy. Use the model with real exchange rate and net exports on the axes. In your graph clearly label your axis and curves. Label the initial equilibrium as Point "A" and the new equilibrium as Point "B". c. Suppose we know the magnitude of the increase in taxes in Croatia. Assume that taxes (T) rises to 4,000. Solve numerically for (i) national savings, (ii) investment, (iii) the trade balance, and (iv) the equilibrium exchange rate.

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a Calculations i National savings National savings S can be calculated as the difference between nat... View the full answer