Fiscal policies-economy to both internal-external balances

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Using the II-XX framework below, show using a figure that fiscal policies by themselves cannot bring the economy to both internal and external balances. Do start with an economy at Point 2 (you will have to address devaluation). A close to complete answer must clearly explain how the economy that evolves from Point 2 can reach points 4 and 3 before finally arriving at point 1, i.e. the desired equilibrium.

Reference no: EM13984058

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