Microeconomics A Contemporary Intro
Microeconomics A Contemporary Intro
10th Edition
ISBN: 9781285635101
Author: MCEACHERN
Publisher: Cengage
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Exchange, e
Income, output, Y
LM
18
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Transcribed Image Text:Exchange, e Income, output, Y LM 18
Suppose that Macro Island is a small open economy with a floating exchange rate regime. Use the Mundell-Fleming
model to show how each of the following events changes the equilibrium exchange rate and income.
ง
C
LM
Income, cut, Y
Show Transcribed Text
ASH
a. The president signs a tax increase into law.
The exchange rate [Select] ["decreases", "increases", "remains the same"]
Income [Select] ["increases", "decreases", "remains the same"]
b. The central bank sells bonds in open-market operations.
The exchange rate [Select] ["decreases", "increases", "remains the same"]
Income [Select] ["increases", "decreases", "remains the same"]
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Transcribed Image Text:Suppose that Macro Island is a small open economy with a floating exchange rate regime. Use the Mundell-Fleming model to show how each of the following events changes the equilibrium exchange rate and income. ง C LM Income, cut, Y Show Transcribed Text ASH a. The president signs a tax increase into law. The exchange rate [Select] ["decreases", "increases", "remains the same"] Income [Select] ["increases", "decreases", "remains the same"] b. The central bank sells bonds in open-market operations. The exchange rate [Select] ["decreases", "increases", "remains the same"] Income [Select] ["increases", "decreases", "remains the same"]
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