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


Given –


C = 40 + 0.8 YD


T = 50


I = 60


G = 40


X = 100


M = 50 + 0.05Y


Equilibrium Income (Y) = A / 1 – c + m


A = C – cT + I + G + X - M


Y = C – cT + I + G + X - M/1 – c + m


= 40 – (O.8 X 50) + 60 + 40 + 100 – 50 / 1 – 0.8 + 0.05


= 190 – 40 / 0.25


= 150 / 0.25


= 600


Net export balance NX = X - M - 0.05Y


= 100 – 50 – (0.05 X 600)


= 20


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