420worksheet18

420worksheet18 - solve for new equilibrium output, exchange...

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ECON 420-002 and 004, Fall 2008 Worksheet 18 Consider the following model: C=200 + 0.8(Y-T) I=900-20r* G=T=100 NX=300-8e r*=5% (M/P)=0.5Y-200r* M=1000, P=2 a. Find the IS* equation. b. Find the LM* equation. c. What is the output? Equilibrium exchange rate? Consumption? Investment? Net Exports? d. Now suppose fiscal authorities increase G to 200. Assuming flexible exchange rate,
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Unformatted text preview: solve for new equilibrium output, exchange rate, consumption, investment and net exports. e. Instead of (d), let us suppose that the monetary authorities increase M to 1200. Assuming flexible exchange rate, solve for new equilibrium output, exchange rate, consumption, investment and net export....
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