Imagine that you run the central bank in a large open economy. Your goal is to stabilize income, and you adjust the mone

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Imagine that you run the central bank in a large open economy. Your goal is to stabilize income, and you adjust the money supply accordingly. Under your policy, what happens to the money supply, the interest rate, the exchange rate, and the trade balance in response to each of the following shocks?
I. The president raises taxes to reduce the budget deficit.
II. The president restricts the import of Japanese cars.