(Answered) Until january 2002 the argentine peso was pegged on a

Management Studies

Until January 2002, the Argentine peso was pegged on a one-to-one basis against U.S. dollar in an arrangement known as a currency board. Suppose that, to begin with, this exchange rate is an equilibrium rate. Use the IS-LM-FX diagram to show how Argentinas output Y, 'interest rate i, and trade balance TB change when Argentina can respond to a decrease in the interest rate on the U.S. dollar.

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