PART 1:
1. Y = 2000
2. D = C + I + G + NX
3. C = 0.8 (Y - T)
4. I = 600 - 6000r
5. G = 160
6. NX = 360-500ε
7. T = 200
8. NFI = 400 - 4000r
9. NFI = NX
10. Y = D
Solve for the equilibrium values of C, I, NX, NFI, r,and ε.
PART 2:
Assume that the threatened default on the government debtdescribed in the problem on page 233 of the text has no immediateeffects on any of the "fundamentals" in the economy (C, G, T, andY). However, suppose that international investors become morereluctant to invest in the U.S. economy because of the risk ofdefault and as a result, the NFI curve shifts outward (the NFIequation becomes NFI = 600 - 4000r). Solve for the new equilibriumvalues of the variables in PART 1.