B. Combining Fiscal Policy and Exchange-Rate On weekdays, you are a staff member of the Council of Economic Advisers for the Prime Minister of the Czech Republic. In preparation for entry into the Eurozone and adoption of the curo as your legal tender, your country is maintaining a fixed exchange rate vis-à-vis the euro, with one euro equal to 25 Czech koruna. The Czech economy is over-heated; the inflation rate is unacceptably high. The country is running a balance-of-trade deficit. Use [(S+T)-(I+G)] and [X-M] functions to demonstrate the appropriate fiscal policy and exchange-rate policy that you will recommend at Friday afternoon's cabinet meeting.

B. Combining Fiscal Policy and Exchange-Rate On weekdays, you are a staff member of the Council of Economic Advisers for the Prime Minister of the Czech Republic. In preparation for entry into the Eurozone and adoption of the curo as your legal tender, your country is maintaining a fixed exchange rate vis-à-vis the euro, with one euro equal to 25 Czech koruna. The Czech economy is over-heated; the inflation rate is unacceptably high. The country is running a balance-of-trade deficit. Use [(S+T)-(I+G)] and [X-M] functions to demonstrate the appropriate fiscal policy and exchange-rate policy that you will recommend at Friday afternoon's cabinet meeting.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter29: International Finance

Section: Chapter Questions

Problem 4P

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