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variables in an open economy aggregate expenditure model:

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You are given the following variables in an open economy aggregate expenditure model;autonomous consumption (Co) = 200;autonomous investment (I0) = 200;government spending = 100;export spending (X0) = 100;autonomous import spending (M0) = 100;taxes (Tp) = 0;marginal propensity to consume (c1) = 0.8;marginal propensity to invest (i1) = 0.1;marginal propensity to import (m1) = 0.15;What would be the new equilibrium if there is an increase in autonomous import expenditure from 100 to 200 which result from an increase in currency exchange rate?;In your postings, please discuss the equilibrium level of income in the initial state and what it would be when the exchange rate changes.

 

Paper#25739 | Written in 18-Jul-2015

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