Business, 05.05.2020 04:08 shondra20

A Standard Keynesian model [8 points] Consider the following model for the macroeconomy. Consumption Function: C = a + b∙Y Import Function: IM = k + m∙Y Export Function: EX = k* + m∙Y where a, b, k, m, k, m are positive parameters; and G, I, G, I, Y* are exogenous variables. (a) Derive the goods-market equilibrium expression for GDP ( Y ) if the economy is closed (EX = IM = 0). What is the fiscal multiplier, ΔY/ ΔG? (b) Derive the equilibrium equation for Y if the economy is open. What is the multiplier now? (c) Derive the equilibrium equation for the trade balance (TB = EX – IM). What is the effect of fiscal policy on TB, ΔTB/ ΔG? g

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A Standard Keynesian model [8 points] Consider the following model for the macroeconomy. Consumption...

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