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Y = C + I + G + NX Y = 18,500; G = 4,000; T...

Y = C + I + G + NX

Y = 18,500; G = 4,000; T = 2,000

C = 750 + 3/4 (Y - T)

I = 1,000 - 50r

CF = 750 - 25r

NX = 1,825 - 150ϵϵ

The world interest rate increases to r* = 10. Solve for consumption, private and public saving, national saving, investment, the trade balance, the net capital outflow (net foreign investment), the domestic real interest rate, and the real exchange rate. (Hint: To solve you need CF as a function of only r, so use the value of r* in the CF function to leave it like that and solve the model.)

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The world interest rate increases to r* = 10. Solve for consumption, private and public saving, national saving, investment, the trade balance, the net capital outflow (net foreign investment), the domestic real interest rate, and the real exchange rate. (Hint: To solve you need CF as a function of only r, so use the value of r* in the CF function to leave it like that and solve the model.)

CF = 750 - 25r

= 750 - 25 (10) = 750 - 250 = 500

Hope it helps you...please like the answer..

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