Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 13, Problem 7RQ
To determine
Difference in IS-LM model of closed and open economy and use of model for transferring recession to other countries.
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Students have asked these similar questions
What is the relationship between national saving
and investment in a closed economy? Start by
explaining what is a closed economy.
How will you differentiate an open economy from a closed economy? Explain with the help of an example.
Consider the following information about an open economy: GDP is $1,000 million, consumption is $850 million, taxes are
$50 million, government spending is $100 million, exports are $100 million, and imports are $125 million. Calculate the
following variables for this economy:
Instructions: Enter numbers rounded to the nearest whole number.
a. Net exports:
million
b. Investment:
million
c. Private savings:
million
d. Public savings:
|million
e. National savings:
million
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- Explain why the multiplier in an open economy is different from the multiplier in a closed economy.arrow_forwardWhich of the following is TRUE of an open economy? GDP = C+I+G+X- IM O GDP = C+ I+G GDP = T- TR -G GDP = SPrivate + SGovernment %3Darrow_forwardBriefly explain the circular flow of income in an economy. How does circular flow of income influence in an open economy in a country?arrow_forward
- Suppose that households decide to save a larger share of their income. Using Mundell - Fleming model for a small open economy, answer the following questions : a. How does it affect IS curve and LM curve ? explain why ? b . What are the changes in total output , exchange rate , consumption , investment and net exports of the economy? Explain why? c . Draw Mundell - Fleming graph to demonstrate your answer ?arrow_forward26. Chapter ma2pe09r, Section .32, Problem 052 (ID: 052.32.MANK09) Figure 32-5 Refer to the following diagram of the open-economy macroeconomic model to answer the questions that follow. Graph (a) Graph (b) REAL INTEREST RATE d b S₁ S₂ QUANTITY OF LOANABLE FUNDS REAL EXCHANGE RATE REAL INTEREST RATE NCO D₂₁ D₂ NET CAPITAL OUTFLOW Graph (c) S₁ S₂ S₂ h QUANTITY OF DOLLARS Refer to Figure 32-5. If the interest rate were initially at r₂ and an import quota were imposed, the interest rate would Oa. decrease because supply would shift right. Ob. stay at r2. Oc. decrease because demand would shift left. Od. increase because supply would shift left.arrow_forwardWhat is the difference between a closed and open economy. Define in a well manner.arrow_forward
- If the government reduces government purchases, then what happens to the real interest rate in a closed economy, small open economy, and a large open economy?arrow_forwardEconomics Consider the following data for country B, an open economy, for this year: Y = $14 trillion C = $6 trillion G = $2 trillion NX = $3 trillion T = $4 trillion TR = $0.5 trillion a) Find country B’s domestic investment. b) Find country B’s private saving. c) Find country B’s public saving. d) Find country A’s national saving. e) Find country B’s net foreign investmentarrow_forwardi need the answer quicklyarrow_forward
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