International Economics Keynesian Model Goods Market homework question, need help!?

Posted on 2013-11-27 17:59:00 in Economics by MISUERDOMINO

Consider the following model for the macroeconomy.

Consumption Function: C = a + b?Y

nImport Functio: IM = k + m?Y

Export Function: EX = k* + m*?Y*

where a, b, k, m, k*, and m* ? 0, 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, ?Y/ ?G?



(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, ?TB/ ?G?

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