Now suppose your current goal is to maintain a particular exchange rate target. Using the open economy IS/LM model, what
Posted: Sun May 29, 2022 7:49 pm
Now suppose your current goal is to maintain a particular
exchange rate target. Using the open economy IS/LM model, what
happens to GDP, the interest rate, and the trade balance (net
exports) in response to each of the following shocks (illustrate
the changes in the 3-pane diagram and then summarize your
findings):
(a) The president of your country cuts taxes.
(b) The president circumvents the central bank and
increases the money supply with- out your approval.
exchange rate target. Using the open economy IS/LM model, what
happens to GDP, the interest rate, and the trade balance (net
exports) in response to each of the following shocks (illustrate
the changes in the 3-pane diagram and then summarize your
findings):
(a) The president of your country cuts taxes.
(b) The president circumvents the central bank and
increases the money supply with- out your approval.