Problem 1.
1. Y=C+I+G+NX
2. Y=10,000
3. G=600
4. T=500
5. C=1000+ 0.8(Y-T)
6. I=1000-40r
7. NX=300-50 ep. Ep is for epsilon or real exchange rate,
8. r=r=10
Answer the following, using the model above.
1. How much are the public savings, private savings and national savings.
2. How much is the investment (I)?
3. How much is the real exchange rate?
4. If G is cut to 500, what will be new level of public savings and on national savings?
5. How much will be NX now?
Problem 2
1. E=1800, U=200, rate of job separation is 3% (s)
2. How much is the unemployment rate?
3. If L (labor force) stays constant, what must be the rate of job finding (f)?
4. What is the average duration of employment? Of unemployment?
5. If s becomes 2%, what will then the average duration of unemployment and unemployment?