Consider the IS-LM model of a small open economy at the equilibrium income, assuming a flat LM curve and flexible exchange rate. a) Describe the difference between the fiscal multiplier in a closed and open economy b) Assume that the government decides to increase taxes. Describe the variation of exports and imports with respect to the initial equilibrium

Consider the IS-LM model of a small open economy at the equilibrium income, assuming a flat LM curve and flexible exchange rate. a) Describe the difference between the fiscal multiplier in a closed and open economy b) Assume that the government decides to increase taxes. Describe the variation of exports and imports with respect to the initial equilibrium

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 46P: Imagine that the economy of Germany finds itself in the following situation: the government budget...

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