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Government spending to reduce its budget deficit

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Reference no: EM131974630

The Danish krone is currently pegged to the euro. Using the IS-LM-FX model for Home (Denmark) and Foreign (Eurozone), illustrate how each of the following scenarios affect Denmark:

1. The Eurozone reduces its money supply.

2. Denmark cuts government spending to reduce its budget deficit.

3. The Eurozone countries increase their taxes.

Reference no: EM131974630

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