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3 (65 marks) (Open Economy IS-LM and Dornbusch Model): Consider the following open-economy IS-LM model, where capital is perfectly mobile across countries (contractionary policy). Assumptions:
3 (65 marks) (Open Economy IS-LM and Dornbusch Model): Consider the following open-economy IS-LM model, where capital is perfectly mobile across countries (contractionary policy). Assumptions: (20 marks) ii) How the exchange rate St changes? iii) Do we have "under" or "over" shooting of exchange rate dynamics? iv) What would be the effect of the policy on the net exports
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Core Macroeconomics
Authors: Eric Chiang
3rd edition
978-1429278478, 1429278471, 978-1429278492, 1429278498, 1464191433, 978-1464191435
