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Consider an economy described by the following equations: Y = C + I + G +...

Consider an economy described by the following equations: Y = C + I + G + NX Y = 8,100 G = 2,300 T = 2,100 C = 500 + 2/3 (Y – T) I = 900 – 50r NX = 1,500 – 250e r = r* = 8.

a. (4 points) In this economy, solve for private saving, public saving, national saving, investment, the trade balance, and the equilibrium exchange rate.

b. (3 points) Suppose now that G is cut to 2,000. Solve for private saving, public saving, national saving, investment, the trade balance, and the equilibrium exchange rate.

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