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Q. Using a figure, show that under full employment, a temporary fiscal expansion would increase output (over-employment) but cannot increase output in the long run. Answer: A t
Q. Using a figure illustrate the simultaneous equilibrium of the foreign exchange and domestic money markets when the exchange rate is fixed at E0 and is expected to remain fixed a
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Q. Explain the following figure: Answer: The figure depict the effect of a permanent increase in the money supply starting from full employment equilibrium. Subsequent to the i
Q. If the central bank does not purchase foreign assets when output increases but instead holds the money stock constant, can it still keep the exchange rate fixed at E 0 ? An
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