For each of the following situations use the is-lm-fx model, Ask an Expert

Economics

For each of the following situations, use the IS-LM-FX model to illustrate the effects of the shock. For each case, state the effect of the shock on the following domestic variables (increase, decrease, no change, or ambiguous) and explain why we observe those changes: Y, i, E, C, I, TB. Assume a fixed exchange rate.

a. All else equal, there is a decrease in taxes.

b. All else equal, the real demand of money falls.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M92195759

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