Advertisements
Advertisements
Question
In the above example, if exports change to X = 100, find the change in equilibrium income and the net export balance.
Solution
C = 40 + 0.8 YD
T = 50
I = 60
G = 40
X = 100
M = 50 + 0.05Y
`"Equilibrium income"(Y) = A/(1 - c + m)`
`= (C - cT + I + G + X - M)/(1-c+m)`
`= (40-0.8xx50+40+60+100-50)/(1-0.8+0.05)`
`= (40-40+40+60+100-50)/0.25`
`=150/0.25 = (150xx100)/25 = 600`
Net export balance NX = X − M − 0.05Y
= 100 − 50 − 0.05 × 600
= 50 − 0.05 × 60
= 50 − 30 = 20
APPEARS IN
RELATED QUESTIONS
What are official reserve transactions? Explain their importance in the balance of payments.
Calculate the open economy multiplier with proportional taxes, T = tY, instead of lump−sum taxes as assumed in the text.
Suppose C = 40 + 0.8Y D. T = 50, I = 60, G = 40, X = 90, M = 50 + 0.05Y
a) Find equilibrium income
(b) Find the net export balance at equilibrium income
(c) What happens to equilibrium income and the net export balance when the government purchases increase from 40 to 50?
Suppose C = 100 + 0.75Y D, I = 500, G = 750, taxes are 20 per cent of income, X = 150, M = 100 + 0.2Y. Calculate equilibrium income, the budget deficit or surplus and the trade deficit or surplus.
Other things remaining the same, when in a country the market price of foreign currency falls, national income is likely ______.
BoP is measured as ______.
Which of the following items relate to BoP?
Autonomous items are related to those transactions which ______.
Disequilibrium in balance of payments means ______.
Which of the following had been responsible for the heavy burden of the deal and its interest?
The balance of trade shows a deficit of ₹300 crore. The value of exports is ₹500 crore. What is the value of imports?
Considering operating surplus which one of the following is not a part of it?
Assertion (A): The Balance of payments is in surplus, if autonomous receipts are greater than autonomous payments.
Reason (R): Autonomous transactions are determined by the difference in the Balance of Payments.
'Deficit' in Balance of payment (BOP) refers to the excess of ______.
Distinguish between Autonomous transactions and Accommodating transactions.
Suppose, Country X, has more inflation than Country Y. Which of the following is most likely situation to happen in such a case, assuming other factors being constant?
