Business, 15.11.2019 01:31 lydiadmanautou04

For each of the following situations, use the is-lm-fx model to illustrate the effects of the shock and the policy response for each case, state the effect of the shock on the following variables (increase, decrease no change, or ambiguous): y, i, e, c, i, and tb. note: in this question (unlike in the work it out question) assume that the government allows the exchange rate to float but also responds by using monetary policy to stabilize output. a. foreign output increases. b. investors expect an appreciation of the home currency in the future. c. the home money supply decreases. d. government spending at home decreases. hint: in each case, make use of the goods market equilib- rium condition to understand what bappens to consump ion, investment, and the trade balance in the shift from the old to the new eqilibrium. repeat the previous question, assuming the central bank responds in order to maintain a fixed exchange rate. in which case or cases will the government response be the same as in the previous question:

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For each of the following situations, use the is-lm-fx model to illustrate the effects of the shock...

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