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<p class="Style"><span><strong>1) </strong>Suppose that the following data is true: </span></p>
<p class="Style"><span>&#160;</span><span>U.S.A</span></p>
<p class="Style"><span>C = 500 </span>+ <span>.9( DI ) <br />T, G </span>= <span>1000 </span></p>
<p class="Style">I <span>= 1500 </span></p>
<p class="Style"><span>X ( exports) = 200 </span></p>
<p class="Style"><span>IM( imports) = </span>.1 <span>Y ( i.e., for every <br />Dollar of income in the U.S., </span></p>
<p class="Style"><span>$ </span><span>.10 goes to purchase imports). <br />( So the formula for NX in the U.S. is: </span></p>
<p class="Style"><span>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; NX </span>= <span>200 - (.1 Y) &#160;&#160;&#160;&#160;&#160;&#160; ) </span></p>
<p class="Style"><span>Also, </span><span>suppose that for every dollar of <br />Income in the U.S., $ </span><span>.01 is spent on <br />Japanese goods/ services. </span></p>
<p class="Style"><span>Japan</span></p>
<p class="Style"><span>C = 500 </span>+ <span>.8(DI) <br />T, G= 500 </span></p>
<p class="Style"><span>NX = 100 </span></p>
<p class="Style"><span>Notes : </span>* <span>Japanese imports do not <br />depend on income. </span></p>
<p class="Style">* <span>You do NOT know I in <br />Japan; so you cannot <br />solve for Japan's <span>Y" </span></span></p>
<p class="Style">* <span>Japan'</span><span>s "Oversimplified <br />"Multiplier" </span>= <span>5 </span></p>
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<p class="Style"><span>&#160;</span><span>a.) Solve for the equilibrium real GDP ( on the demand side) in the U.S. </span></p>
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<p class="Style"><span>b.), Solve for the U.S. multiplier (with imports).&#160; </span></p>
<p class="Style"><span>c.) Now suppose that the U.S. government increases spending by 200 (but <br />net taxes don'</span><span>t change). Solve for the CHANGE in the equilibrium real <br />GDP ( on the demand side) in the U.S.(show your work).&#160; </span></p>
<p class="Style"><span>d.) As a result of this change in the equilibrium real GDP ( on the demand <br />side) in the U.S., </span><span>Japanese exports will change. (i.e., U.S. imports from <br />Japanwill change as GDP in the U.S. changes). Show, on an income- <br />expenditure diagram for Japan, how (in general) the change in exports <br />affects equilibrium real GDP ( on the demand side) in Japan. </span></p>
<p class="Style"><span>e.) Show ( on a relevant graph) how the change in exports affects the <br />Japanese AD Curve (in general- you don't need to solve for any specific <br />points on the curve(s)).&#160; </span></p>
<p class="Style"><span>f.) </span><span>Solve for the CHANGE in equilibrium real GDP ( on the demand side) in <br />Japan, after the increase in U.</span><span>S. government spending ( show your work).&#160;<br /> </span></p>

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