Solve for equilibrium output in the domestic economy

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Reference no: EM131112323

Consider an open economy in which the real exchange rate is fixed and equal to one. Consumption, Investmentnt, and Government spending are given by:

C=10+0.8 (Y-T), I=10, G=10, and T=10, IM=0.3Y and X=0.3Y* where Y* denotes foreign output.

A) Solve for equilibrium output in the domestic economy

B) Given Y* what is the multiplier in this economy? If we were to close the economy-so exports and imports were identically equal to zero-what would the multiplier be? Why would the multiplier be different in a closed economy?

Reference no: EM131112323

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