Consider an open economy with flexible exchange rates. Suppose output is at the natural level, but there
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Consider an open economy with flexible exchange rates. Suppose output is at the natural level, but there is a trade deficit. The goal of policy is to reduce the trade deficit and leave the level of output at its natural level. What is the appropriate fiscal and monetary policy mix?
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To reduce the trade deficit while maintaining output at the natural level in an open economy with flexible exchange rates a combination of fiscal and ...View the full answer
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