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Q. Explain how an increase in government spending would affect the DD-AA schedule in the short run.
Answer: A raise in government spending will raise aggregate demand, which will shift the DD to the right. If AA leftovers unchanged the new equilibrium will be at a higher Y and lower E. Ever since E is the nominal exchange rate a lower E is an appreciation of the currency.
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. Discuss the values of private saving in closed and open economies. Answer: In the closed economy private saving Sp is equal to I + (G - T) and in an open economy private sav
Q. Explain how the AA schedule is derived. Answer: For a fixed real money supply an enhancement in output leads to an increase in the domestic interest rate. In the foreign e
using diagrams, corden''s theory of customs union under conditions of oligopoly and within the existence of external economics of scale.
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explain the newo clacical theory of international trede
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Q. Based on the case study, answer the following question: Can currency boards make low-inflation policies credible? Answer: Currency boards have the power to bring in anti-
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