Effects of two policies, Compare the effects of these two

Effects of two policies

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Reference no: EM135675

Q. In 2009-2010, when the economy was in a deep slump, the Fed had taken interest rates to zero (increase in money supply) and the Obama administration was arguing for a larger fiscal stimulus (increase in government spending and decrease in taxes).

Compare the effects of these two policies in terms of their implications for the current account. If policy makers are concerned about the current account deficit, discuss whether stimulatory fiscal policy or monetary policy makes more sense in this case.
You can draw an IS-LM-FX diagram to better understand the above problem.

Reference no: EM135675

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