Y= C+I +G +X
C= 220 + 0.63Y
I= 400 - 2000R + 0.1Y
M=(0.1583Y - 1,000R)P
X= 600 - 0.1Y - 100 EP/Pw
EP/Pw = 0.75 + 5R
G=1,200 and the money supply M=900. Suppose that the ROW price level Pw is always =1.0 and the US price level is predetermined at 1.0
A) Calculate a change in the mix of monetary and fiscal policy that leaves output equal to the level it is when M=900 and G=1,200 but in which the interest rate is 3% rather than 5%. Describe what happens to the value of the dollar, net exports, the government budget deficit, and investment for this change in policy.