We assume that the world consists of two large open economies,USA and China. USA Initial Conditions C
Question:
We assume that the world consists of two large open economies,USA and China.
USA Initial Conditions
Cd = 320 + 0.4(Y-T) - 200rw
Id = 150 - 200rw
Y = 1000
T = 200
G =275
China Initial Conditions
CdF = 480 + .4(YF -TF) - 300rw
IdF = 225 - 300rw
YF = 1500
TF = 300
GF = 300
A. What is the equilibrium interest rate that clears theinternational goods market?
r^w = _____
B. Now calculate the levels of desired savings, investment, andnet exports for each country at this equilibrium world realinterest rate
s^d US ______ S^d China ________
I^d US________ I^d China ________
NX US________ NX China _________
Now China experiences an adverse productivity shock. As aresult, China's output falls to 1400.
C. Resolve for the world real interest rate that clears theinternational goods markets along with the 'new' Sd andId for each country.
S^dH__________ S^dF ________
I^dH ___________ I^dF _________
Financial and Managerial Accounting
ISBN: 978-0538480895
11th Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren