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Assuming the Marshall-Lerner condition holds and using the ZZ/Y and NX graphs, illustrate graphically and describe what effect (i) a decrease in taxes (ii) a decrease in foreign output (iii) a real depreciation will have on output, exports, imports, and net exports. Clearly label all curves and the initial and final equilibria.

Microeconomics, Economics

  • Category:- Microeconomics
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