An open economy with absolute mobility of capital is described as follows: consumption function is given as C = 50 +0,8(Y-T), where Y is output, and I is net taxes. Investment function is given as I = 20-10i, where I is nominal interest rate. Government spending G = 20, tax Tx= 10, export Ex = 6E+10, import Im = 22-4E+0,3Y where E-nominal exchange rate (price of foreign currency in terms of domestic currency). For one unit of foreign currency, you can get 3 units of domestic currency. The real money supply is M³/P = 50. The demand for real money is described by the following function: L(Y, i) = 0, 5Y-10i. Find BP curve, if the economy is initially in the internal and external equilibrium. Write an equation for BP without spaces and signs

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An open economy with absolute mobility of capital is described as follows: consumption function is given as C =
50 +0,8(Y- T), where Y is output, and T is net taxes. Investment function is given as I = 20-10i, where I is
nominal interest rate. Government spending G = 20, tax Tr = 10, export Ex
22-4E +0,3Y where E- nominal exchange rate (price of foreign currency in terms of domestic currency). For
one unit of foreign currency, you can get 3 units of domestic currency. The real money supply is M*/P= 50. The
demand for real money is described by the following function: L(Y, i) = 0, 5Y-10i.
= 6E + 10, import Im =
Find BP curve, if the economy is initially in the internal and external equilibrium. Write an equation for BP without
spaces and 9% signs
Transcribed Image Text:An open economy with absolute mobility of capital is described as follows: consumption function is given as C = 50 +0,8(Y- T), where Y is output, and T is net taxes. Investment function is given as I = 20-10i, where I is nominal interest rate. Government spending G = 20, tax Tr = 10, export Ex 22-4E +0,3Y where E- nominal exchange rate (price of foreign currency in terms of domestic currency). For one unit of foreign currency, you can get 3 units of domestic currency. The real money supply is M*/P= 50. The demand for real money is described by the following function: L(Y, i) = 0, 5Y-10i. = 6E + 10, import Im = Find BP curve, if the economy is initially in the internal and external equilibrium. Write an equation for BP without spaces and 9% signs
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