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Y = C + I + G + X - M 2. C = 200 + 0. I = 100 4. G = 200 5.



                       1. Y = C + I + G + X - M

                       2. C = 200 + 0.8Y

                       3. I = 100

                       4. G = 200

                       5. X = 150

                       6. M = 50 + 0.05Y


           a. How much is equilibrium income and open economy multiplier?

           b. How much is consumption, saving, and imports at equilibrium level of income?

           c. Is the balance of payments in surplus or deficit?

           d. By how much do we need to change G in order to have a balance of payments         

                equilibrium?

           e. What will be the impact on Y and the trade balance if exports increase by 10 (say 

               due to an increase in foreign demand) and Fed cuts the discount rate which results

               in an increase in investment by 10 and an increase in autonomous consumption by

              10.

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