What happens to net exports and the nominal exchange rate

Reference no: EM131805836

Use the open-economy IS LIM-FE model (assume a Keynesian model) is explain and illustrate how a negative demand shock (e.g., a decrease in consumer spending) in the U.S. gats transmitted to foreign economies.

What will happen to output, employment, the real interest rate, and the price level in both the domestic (U.S.) and foreign economy as a result of the decrease in consumer spending in the U.S.?

What happens to net exports and the nominal exchange rate? Explain fully and illustrate with the appropriate graphs.

Reference no: EM131805836

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