Consider the following shortrun model of the economy. C = 50 +0.9(YT) , I = 50 – r , G=T=100 , M=3900, P=5, L(Y,r) = 0.8y – 2r (a) Find the IS…
September 3, 2020
the demand for labor called a derived demand? In the labor market, what are the firm’s demand curve for labor and the workers’ supply curve of labor?…
September 3, 2020

Question 1: The behavioral functions are given as follows.C = 20 + 0.8(Y − T); I = 14; G = 20; T = 10; IM = 0.5Y; X = 0.1Y*; Y* = 100where Y is domestic income; Y* is foreign income; C is consumption; T is tax; I is investment;G is government spending; IM is import; X is export.(1) Calculate the equilibrium level of output in closed economy.(2) Calculate the equilibrium level of output in open economy case. Is this economy runningtrade deficit or surplus?(2) Calculate the multiplier for closed economy case. Calculate the multiplier for open economycase. Explain why the multipliers are different in two cases (I need an intuitive explanation).

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