Consider the IS-LM-BP model of a small open economy with the relevant behavioral function as follows: C = 50 + 0.75-(Y-T). I=200-20-r, G=200 T=200, NX=200-50e, MIP=Y-40r, M=3000, P=3, r*=5. Among them, C is private consumption, Y is output, T is tax, r is interest rate, G is government consumption, I is investment, NX is net export, e is exchange rate, M is money supply, P is price, r* Cars for the world. Please answer the following questions: 1) Calculate the exchange rate, output and net exports under the overall equilibrium. 2) Please draw a graph and calculate under the floating exchange rate system, when the government expenditure increases by 50, the equilibrium output, the weight rate, what is the money supply and net exports? 3) Please draw a graph and calculate how much the equilibrium output, exchange rate, money supply and net exports will be when government spending increases by 50 under a fixed exchange rate system?

Consider a two-period small open economy with two sectors: tradable and nontradable goods. The representative household lives for 2 periods and receives endowments of both goods. Assume that household's consumption is a composite of tradable and non-tradable goods described by Cobb-Douglas aggregation technologies as in Topic 3. Suppose that the endowment of tradables is decreased in the first period. Then: O a. The relative price of nontradables vs tradables decreases and the real exchange rate depreciates Ob. The relative price of nontradables vs tradables increases and the real exchange rate appreciates Ос. Impossible to tell from the provided information Od. The relative price of nontradables vs tradables decreases and the real exchange rate appreciates O e. The relative price of nontradables vs tradables increases and the real exchange rate depreciates

Consider the model where an individual has wealth k which they can either save or consume. If they save it, they receive a fixed and exogenous return r. The instantaneous utility function is given by: u(c, k) = c + a(k) where c is consumption, k is wealth, and a(k) is a function that defines the utility that an individual gets from holding wealth. The growth in wealth is given as the returns on wealth rk, plus income from working z(t), minus consumption c(t). a. Write out the differential equation for wealth. b. For an infinite time model, set up the optimal control problem with discounting at a rate 8. c. Write the current-valued Hamiltonian of this problem. d. Derive the steady-state level of consumption.

Consider the basic Macroeconomic model involving:        Private sector consumption: C = co+c1(Y-T); Y = GDP, T = Taxes        Tax function: T = to+t1Y        Business sector investment: I = io+i2r, r=interest rate        Government spending: G = Go        Exports: X = xo+x1x; x = Exchange rate of the dollar        Imports: M = mo+m1Y+m2x; x = Exchange rate (a) Identify and explain the parameters: co, t1, i2, and m2. (b) Solve this model for the equilibrium GDP (Y*).

Consider two economies, A and B. Economy A has a marginal propensity to consume of 0.9, a net tax rate of 0.2 and a marginal propensity to import of 0.2. Economy B has a marginal propensity to consume of 0.7, a net tax rate of 0.2 and a marginal propensity to import of 0.2. Suppose there is an increase in autonomous investment of $5 billion in each of these economies. Which of the following statements is true? Select one: O A. The AD curve shifts farther to the right in Economy A than Economy B. O B. The AD curve shifts to the left the same amount in both economies. O C. The simple multiplier is larger in Economy A. O D. The AD curve shifts to the right the same amount in both economies. O E. The AD curve shifts farther to the left in Economy B than Economy A.

Consider the following short-run, closed economy model of the economy. Goods Market C = 50 + 0.5(Y – T) I = 150 – 10r ; NX = -200 G = 150 ; T = 100   Money Market M = 20,000 P = 100 L(Y, r) = Y – 50r   1. Find the equilibrium values of r and y. *** This has been answered*** Goods Market = 600 - 20r Money Market = 200 + 50r equilibrium value of r = 5.71; Y = 485.8   2. At the equilibrium in part 1, what is the value of national savings (S = Y – C – G)? Investment? Show the results using a graph for the market of loanable funds. Is that market in equilibrium? Explain.

a) A planner in a small, open economy has a utility function U = x1X2 and production takes place according to the production functions Y1 = 10L, – 0.5L Y2 = 10L2 – L The world prices of the goods are p1 10 and p2 5. The total amount of labour %| %3D available in the economy is 5 units. (i) Formulate the Lagrange equation. (ii) Write down the Karush-Khun-Tucker conditions. (iii) Determine a possible solution.

Assume a two-period small open economy model, where the national product is 50 in the current period, and 88 in the future period. The world real interest rate is 10% per period. The representative consumer has the following utility function: U(c,G,c’,G’) = ln(c+G) + ln(c’+G’). a) What are the optimal consumption plus government spending in the current and in the future period? What is the current account surplus? Show this in a diagram. b) Now, suppose that governments in the rest of the world impose a tax on lending to foreigners of 5%. Determine how this affects consumption plus government spending in the present and the future, and the current account surplus. Explain your results. c) Suppose that governments in the rest of the world still impose a tax on lending to foreigners of 5%. However, the national country found a huge reserve of oil and the current period income increased to 100. The Determine how this affects consumption plus government spending in the present and the…

Given a closed economy where there is no public sector. Production in the economy can be described with the following production function: Y = F (K, AL) = Kα(AL)1−α  where Y is the productive capacity of the economy, K is the capital stock, L is the labor force, and A is knowledge. Think of AL as a single factor of production where knowledge and the amount of labor are multiplied together. Let's call the multiplier (ie AL) the efficiency of labor. Given that A = 1.5 and saving is a fixed rate of the production, or s = 33%. The capital stock shrinks by 3% per year, while the population grows is nobody Finally, α = 0.4. Answer the following questions based on the above criteria. (a) Show mathematically that the marginal productivity of labor and capital is positive but diminishing. Explain in words and with a picture what the term positive but diminishing marginal productivity means. (b) Show mathematically that saving and investment are equivalent in a closed economy (c) Show…

Read Kiyotaki (1998). Consider the model in section 2 of the paper. Suppose there is no borrowing constraint (i.e., assume 0 is arbitrarily large). Also assume that a = 1.2, ß = 0.9, y = 1.05, d = 0.1, and n = 4. (The notations of variables and parameters follow Kiyotaki (1998). Just in case, & denotes the lower case of Delta in the Greek alphabet.) Reference: Kivotaki, N. (1998). "Credit and Business Cycles." The Japanese Economic Review, volume 49, issue 1, pages 18-35. 1. What is the equilibrium value of the net interest rate in the steady state? (For example, if your answer is 5% in percentage points, then enter 0.05.) 2. Compute the ratio of aggregate borrowing (Bt+1 /rt) to aggregate output (Yt + Y't) in the steady state. (You can assume that this ratio is constant in each period in the steady state.) Notes: Make sure to clarify the notations of variables and parameters in your proof clearly if they are different from those defined in Kiyotaki (1998).