Consider the following economy:\[ C = 200 + 0.8(Y - 0.25Y) \]\[ I = 100 + 50i \]\[ G = 1000 \]\[ EX = 40 + 2\varepsilon \]\[ IM = 40 + 0.1Y - 3\varepsilon \]1. (a) Find the $ Y^* $, where $\varepsilon$ represents exchange rate, i.e., $1 = Rs.52. Consider $\varepsilon = 0.15$.2. (b) Calculate the effect of rupee depreciation from 52 to 61 on $ Y^* $.Page 11

Solution: We have details for the economy as C= 200+0.8(Y-0.25Y); I= 100+50i ; G=100 EX= 40+2e…

Answered: Consider the following economy: C = 200…

Consider the following economy: C = 200 + 0.8 (Y - 0.25Y); I= 100 + 50i; G = 1000; EX = 40 + 2 ɛ; IM = 40+ 0.1Y – 3ɛ %3D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider the following economy:

\[ C = 200 + 0.8(Y - 0.25Y) \]
\[ I = 100 + 50i \]
\[ G = 1000 \]

\[ EX = 40 + 2\varepsilon \]
\[ IM = 40 + 0.1Y - 3\varepsilon \]

1. (a) Find the $ Y^* $, where $\varepsilon$ represents exchange rate, i.e., $1 = Rs.52. Consider $\varepsilon = 0.15$.

2. (b) Calculate the effect of rupee depreciation from 52 to 61 on $ Y^* $.

Page 11

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