A standard macroeconomic model for income determination in an open economy is
(i)
(ii)
(iii)
where. Here
is an exogenous constant that denotes exports, whereas
denotes the volume of imports. The function
in (iii) is called an import function. By inserting (ii) and (iii) into (i), we obtain an equation that defines
as a function of exogenous investment
.
(a) Find an expression forby implicit differentiation. What is the likely sign of
? Discuss the sign of
(b) Find an expression for.
Taking the derivative with respect to I and using the chain rulegivesOriginally Posted by Runty
A standard macroeconomic model for income determination in an open economy is
(i)
(ii)
(iii)
where
(a) Find an expression for
(b) Find an expression for
This should get you started.
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