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AD-AS Open Economy Model The following equations describe a small open economy. Figures (except for parameters) are in millions of dollars. C = Co + cYD (Private consumption) YD = Y + TR - T (Private disposable income) T = To + tY (Total taxes) I = Io + zY (Private investment) G = Go, TR = TRo (Gov. exp and Transfers) X = Xo (Total exports) IM = IMo+mY (Total imports) Y = C + I + G + X-IM (Goods Market Equilibrium condition) Endogenous Variables: C, YD, T, IM, Y, I and Y Exogenous Variables: Co = 300, To = 80, Io = 250, Go = 100, TRo = 150, IMo =120, Xo = 220, Parameters: c = 0.8, t = 0.2, z = 0.14, m = 0.16 Policy variables: Fiscal policy: (G, t and TR), Monetary policy: (N/A) Questions: i) Calculate the equilibrium level of output in the model. ii) Calculate the values of other endogenous variables and construct and complete the NAM (National Income Accounting Matrix) such as given on page 2.6 of your study guide. You must show how you calculate values of endogenous variables in the model.
Briefly explain the use of graphs as a way to represent economic relationships. What is an inverse relationship How does it graph What is a direct relationship How does it graph Graph and explain the relationships (other things equal) you woul..
Taxicab fares in most cities are regulated. Several years ago taxicab drivers in Boston obtained permission to raise their fares 10 percent, and they anticipated that revenues would increase by about 10 percent as a result.
Always Round Tire has a production function of Q = 300 L.75 K.5. In the short run, if L = 250 and K = 25, what happens to the output of tires if L jumps to 300 and then 350. What law does this illustrate?
America's Water Meter Industry is dominated through 4-companies: Rockwell, Badger, Neptune and Hersey. Rockwell has 35 percent market share, and the remaining share rest.
The Government and Social Responsibility
Comment on the statement. Do you agree with the speaker? Explain. Use a graph to illustrate the answer indicating the firm's short-run cost structure
what is the difference between contractionary and expansionary fiscal policies? which is more appropriate today?
A printer's wage rate is $20, and the price of a printing press is $5,000. The last printer added 20 books to total output, while the last press added 1,000 books to total output.
When the economy is at full employment, are all workers employed? Briefly explain.
Suppose the government decides to increase taxes by $30 billion in order to increase Social Security benefits by the same amount. How will this combined tax-transfer policy affect aggregate demand at current prices
When a firm focuses on increasing profitability by customizing the firm's good or services so that they provide a good match to tastes in different national markets, it is pursuing A Localization strategy.
Is the real interest rate on this loan higher or lower than expected? Does the lender gain or lose from this unexpectedly high inflation? Does the borrower gain or lose from this unexpectedly high inflation?
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