In addition to depending on the exchange rate (and therefore on the interest rate), imports may depend

Question:

In addition to depending on the (and therefore on the interest rate), imports may depend on short-run output: when the economy is booming, consumers tend to demand more foreign goods. To incorporate this result into our short-run model, suppose the new net exports equation is

Derive the IS curve with this new equation, and explain how it differs from the standard IS curve in the short-run model.

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...