. E Question 1: C a) The consumption function is C=1.5+0.8(Y-T). What is the marginal propensity to consume? What is the

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E Question 1 C A The Consumption Function Is C 1 5 0 8 Y T What Is The Marginal Propensity To Consume What Is The 1 (213.79 KiB) Viewed 107 times

. E Question 1: C a) The consumption function is C=1.5+0.8(Y-T). What is the marginal propensity to consume? What is the marginal propensity to save? TB=5(1- b) The trade balance is -) -0.2(Y-8) What is the marginal propensity to consume foreign goods? What is the marginal propensity to consume home goods? I=3- 10 c) The investment function is What is investment when the interest rate i is equal to 0.10 = 10%? d) Assume government spending is G. Add up the four components of demand and write down the expression for D. e) Assume forex market equilibrium is given by i=[--1]+0.15 E where the two foreign return terms on the right are expected depreciation and the foreign interest rate. What is the foreign interest rate? What is the expected future exchange rate? f) solve for the IS curve: obtain an expression for Y in terms of i, G, and T (eliminate E). Question 2: How would a decrease in the money supply of Australia (its currency is the Australian dollar affect its own output and its exchange rate with Mexico (currency is the Mexican Peso)? Do you think this policy in Australia might also affect output across the border in Mexico? Explain a