Illustrate new equilibrium an increase expenditure

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Reference no: EM1367343

Q. You are given 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

Illustrate what would be new equilibrium if re is an increase in autonomous import expenditure from 100 to 200 which result from an increase in currency exchange rate?

In your postings, please Examine equilibrium level of income in initial state and illustrate what it would be when exchange rate changes.

Reference no: EM1367343

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