Consider an economy described by the following equations:
Y =C+I+G+NX, Y =5,000,
G = 1, 000,
T = 1, 000,
C =250+0.75(Y −T), I = 1, 000 − 50r,
NX = 500 − 500ε, r = r∗ = 5
(a) In this economy, solve for national savings, investment, the
trade balance, and the equilibrium exchange rate.
(b) Suppose that G rises to 1,250. Solve for national saving,
investment, the trade balance, and the equilibrium exchange rate.
Explain what you find....