420worksheet5ans

420worksheet5ans - Y = C I G NX Y = 2,000 G = 400 T = 200 C = 500 0.75(Y-T I = 200-10r NX = 100-100ε r = r = 4 a In this economy solve for

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Worksheet 5 1. In a closed economy, the following functions hold: C = 200 + 0.8(Y-T) I = 200 -10r G = 500 Y = 2000 T = 500 a. What is the equilibrium interest rate? b. What is the equilibrium level of Consumption and Investment? a. You can use Y=C+I+G or S=I to solve for r. Method 1: S = Y-C-G = 2000- (200+0.8(2000-500)-500) = 100 S = I in equilibrium 100 = 200-10r r = 10 Method 2: Using Y = C+I+G 2000=200+0.8(2000-500)+200-10r+500 =2100-10r r = 10 C = 200 +0.8*(2000-500)=1400 I = 200-10r = 200-10*10=100 2. Consider an open economy described by the following equations:
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Y = C + I + G + NX Y = 2,000 G = 400 T = 200 C = 500 + 0.75 (Y-T) I = 200-10r NX = 100-100ε r = r * = 4 a. In this economy, solve for national saving, investment, the trade balance, and the equilibrium exchange rate. National Saving: S= Y-C-G = 2000-(500+0.75*(2000-200)-400) S=-250 Investment: I = 200-10*4=160 Equilibrium exchange rate: S-I = NX-250-160=100-100ε-510=-100ε Exchange rate = 5.10 Trade balance = 100-100*5.10=-410...
View Full Document

This note was uploaded on 11/17/2008 for the course ECON 420 taught by Professor Hill during the Spring '08 term at UNC.

Page1 / 2

420worksheet5ans - Y = C I G NX Y = 2,000 G = 400 T = 200 C = 500 0.75(Y-T I = 200-10r NX = 100-100ε r = r = 4 a In this economy solve for

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online