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.

Economics:
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ISBN:9781285859460
Author:BOYES, William
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Chapter34: World Trade Equilibrium
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  1. 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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