Show what happens to boversias output and interest rate

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Reference no: EM131221926

Boversia has a fixed exchange rate against the dollar.

Taxes rise in the United States, reducing U.S. aggregate expenditure. The Federal Reserve adjusts the U.S. interest rate to keep output constant, and Boversia's central bank adjusts its interest rate to keep the exchange rate constant.

Using graphs, show what happens to Boversia's output, interest rate, and exchange rate.

Reference no: EM131221926

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