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What are the equilibrium values of net exports

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Reference no: EM131704579

Consider the following model of a small, open economy:

  • Y = 4000
  • Yd = C + I + G + NX
  • Y = Yd
  • C = 400 + 0.8(Y - T)
  • I = 800 - 5000r
  • NX = 800 - 400E (E = Exchange Rate)
  • G = 300
  • T = 1000

A. Assuming that the world's real interest rate is 8% (rw* = 0.08), what will national saving (S) and investment (I) be for this economy?

B. What are the equilibrium values of net exports (NX) and the real exchange rate (E)?

Reference no: EM131704579

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