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In: Economics

M/P = 24 + 0.8Y ? 400r C =2+0.8(Y?T)?200r I =30?200r NX =24?0.1Y?2e Y =C +I...

M/P = 24 + 0.8Y ? 400r

C =2+0.8(Y?T)?200r

I =30?200r
NX =24?0.1Y?2e
Y =C +I +G+NX

You are given the following values for various variables: rw = 0.05; M/P = 100;G = 10 and the budget is balanced. Using the model, find the values for Y, e and the components of demand. Verify that the values you found for consumption, investment and net exports satisfy the goods-market equilibrium condition, given the value of G. Finally, suppose that the nominal exchange rate ( enom ) is 0.8

and the foreign price level ( PFor ) is 1.0. Use this information to find the domestic price level and the nominal value of the money supply (M).

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Expert Solution

Rahul Sunny answered 2 years ago
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