Look again at the shift in money demand in Figure 19-2, and imagine that the exchange rate
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Look again at the shift in money demand in Figure 19-2, and imagine that the exchange rate is held fixed, so that the money supply automatically expands. How would this affect lending by domestic banks? If home firms are dependent on lending from domestic (as opposed to foreign) banks, and their investment rises when domestic bank lending expands, might the shift in the AA schedule affect domestic output?
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Related Book For
International Economics Theory & Policy
ISBN: 9780138002121
8th Edition
Authors: Paul R Krugman, Maurice Obstfeld
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