What happens to the money supply and the interest rate

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Imagine that you run the central bank in a large open economy with a floating exchange rate. Your goal is to stabilize income, and you adjust the money supply accordingly. Under your policy, what happens to the money supply, the interest rate, the exchange rate, and the trade balance in response to each of the following shocks? a)The government raises taxes to reduce the budget deficit. b)The government restricts the import of foreign cars.

Reference no: EM131006321

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