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In the Above Example, If Exports Change to X = 100, Find the Change in Equilibrium Income and the Net Export Balance. - Economics

Sum

In the above example, if exports change to X = 100, find the change in equilibrium income and the net export balance.

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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

Concept: Balance of Payments - Balance of Payments Surplus and Deficit
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APPEARS IN

NCERT Class 12 Economics - Introductory Macroeconomics
Chapter 6 Open Economy Macroeconomics
Exercise | Q 14 | Page 101
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