Exchange rate system and short run trends

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Suppose there is balance on current account surplus and underemployment equilibrium in the real and monetary sides of the domestic economy. Discuss the short-run movement toward equilibrium in the currency markets in a flexible exchange system. How is your answer different if the government pursues a Keynesian full-employment policy of deficit spending coupled with targeting the interest rate through Federal Reserve open market operations?

Reference no: EM1314553

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