ECON 200 Problem Set 8 Fall 2007

ECON 200 Problem Set 8 Fall 2007 - Due at the beginning of...

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Due at the beginning of class on November 27, 2007 Economics 200 Macroeconomic Theory Problem Set 8 1. Consider a small open economy with short-run behavior described by the following relationships: ]œGMKR\ Gœ+,Ð]XÑ XœX >] Mœ .< R\ œ Q T œ5] 0Ð< Ñ <œ< E / D \7]  9% 1 where all symbols have their usual meanings, except that is defined so that when the real < interest rate is 5%, 5. (a) Show that the IS curve for this economy is given by +,X  .< K\ ",Ð">Ñ7 E D . (b) Give the expression for the autonomous spending multiplier in this economy. How does it compare in magnitude to the case considered in class? Explain. (c) Show that the LM curve for this economy is given by  Ð < Ñ "Q 0 5T 5 ‡/ 1 (d) Suppose that the parameters of the model have the values 98, .9, 20, X œ E > œ œ . œ5 œ # & 0 œ7 œ Þ " $ \ œ œ & .3, 750, 20, . , 10, , 100, and . Suppose also that the D 9 exogenous variables have the values , , , , and . K œ (&! T œ " T œ " < œ & œ !
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ECON 200 Problem Set 8 Fall 2007 - Due at the beginning of...

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