Illustrate how each of the following scenarios

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

a. The Eurozone reduces its money supply.

b. Lithuania cuts government spending to reduce its budget deficit.

c. The Eurozone countries increase their taxes.

Reference no: EM131204783

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