Consider a world with two countries, home and foreign. The economy is initially in an equilibrium. What combination of policies (fiscal, monetary) could the government use to improve the trade balance without changing the level of output? Show the effects of these policies by using an AA-DD-XX diagram.
Consider a world with two countries, home and foreign. The economy is initially in an equilibrium. What combination of policies (fiscal, monetary) could the government use to improve the trade balance without changing the level of output? Show the effects of these policies by using an AA-DD-XX diagram.
Chapter34: World Trade Equilibrium
Section: Chapter Questions
Problem 11E
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Consider a world with two countries, home and foreign. The economy is initially in an equilibrium. What combination of policies (fiscal, monetary) could the government use to improve the trade balance without changing the level of output? Show the effects of these policies by using an AA-DD-XX diagram.
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