Exercise and Solutions Manual to Accompany Foundations of by Ben J. Heijdra, Laurie Reijnders, Ward Romp

By Ben J. Heijdra, Laurie Reijnders, Ward Romp

This workout and recommendations guide accompanies Foundations of recent Macroeconomics, moment version Foundations of recent Macroeconomics offers with all of the significant subject matters, summarizes the real ways, and offers scholars a coherent perspective on all elements of macroeconomic inspiration. every one bankruptcy of the guide includes brief solution questions through longer intermediate and complicated workouts. tricks and suggestions in addition to complete ideas are supplied making this a useful relief to the most textual content.

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C) Show that a bond-financed and a tax-financed rise in public spending have identical effects on output, consumption and the interest rate and, furthermore, that the short-run and long-run effects coincide. (d) Show that under bond financing the government debt explodes unless taxes rise strongly enough with government debt (or public spending is cut back severely enough as government debt explodes). Question 7: The Blinder-Solow model with capital accumulation Consider a Blinder-Solow model of a small open economy with an integrated capital market.

The characteristic roots of ∆ are the zeros of the characteristic equation of ∆, A(λ) ≡ |∆ − λI | = 0. After some manipulation we get: A(λ) = −φy∗ − λ −y∗ = λ (λ + φy∗ ) + ζφy∗ ζφ −λ = λ2 − tr ∆λ + |∆| = 0. 87) where D ≡ (φy∗ )2 − 4ζφy∗ . There are two possible cases that must be considered, depending on the sign of D. C HAPTER 2: D YNAMICS IN AGGREGATE DEMAND AND SUPPLY Be 51 . Be=0 ! D C !

17) we find the reduced form expression for imports: C0 − cT + I + G + X0 1−c+m (1 − c + m) X0 − m(C0 − cT + I + G + X0 ) = 1−c+m (1 − c) X0 − m(C0 − cT + I + G ) . 31). 31) with respect to G we obtain: dY 1 = > 0. 35) from which we conclude that the multiplier falls as the import propensity gets larger. The import leakage implies that part of the additional income generated by the fiscal impulse leaks away in the form of imports from abroad. These imports are produced abroad and do not generate domestic income.

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