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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 temporarily monetary expansion will move the economy from DD1 to DD2 and output increases. A permanent financial expansion will as well shift the AA curve to the left and down. The small exchange rate appreciates that is E decreases.
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Q. Explain what a "vehicle currency" is. Why is the U.S. dollar considered a vehicle currency? Answer: A vehicle currency is one specifically widely used to denominate inter
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Q. It can be argued that Japan's explicit promotion of its microchip industry was an excellent paradigm of successful industrial policy. What criteria could you apply to calculat
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