Y = C (Y – T) + I (r* ) + G – NX(e) M/P = L(r*, Y) %3D a) If the taxes are raised in this economy, and assuming a floating exchange rate regime; explain what happens to: (1 i. ... .. iii. the trade balance.
Y = C (Y – T) + I (r* ) + G – NX(e) M/P = L(r*, Y) %3D a) If the taxes are raised in this economy, and assuming a floating exchange rate regime; explain what happens to: (1 i. ... .. iii. the trade balance.
Chapter21: International Finance
Section: Chapter Questions
Problem 14QP
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Transcribed Image Text:An economy is described by the following two
equations.
Y = C (Y – T) + I (r* ) + G – NX(e)
M/P = L(r*, Y)
a) If the taxes are raised in this economy, and
assuming a floating exchange rate regime;
explain what happens to: (
i.
....
ii.
the trade balance.
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