Assuming imperfect capital mobility, analyze
the effects of the following policy actions for both the fixed and
flexible exchange rate cases:
a. A decline in the money supply from M0
to M1.
b. A decrease in government spending from G0
to G1.
Include in your answer the effects of the policy action on both
income and the interest rate,
as well as on the balance of
payments and the exchange rate.
ANSWER ONLY BY DIAGRAMS
Assuming imperfect capital mobility, analyze the effects of the following policy actions for both the fixed and flexible
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