Following are parameters for an open economy open economy where C=10+.8(y-T); I=10 G=10 T=10 and imports and exports are given by IM=.3Y and X=.3Y* respectively where Y is foreign output.
Provide an equation that resolves to the lowest level. Given Y*. What is the mulipier effect of this open economy?
Explain the behavior of the IS and LM curves and nominal interest rate in the domestic economy, and then to the exchange rate between the domestic economy.