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Carefully explain the following Q1) consider the case of a small open economy. Will an increase in Government spending have a bigger impact on the
Carefully explain the following
Q1) consider the case of a small open economy. Will an increase in Government spending have a bigger impact on the price level (i.e. inflation) with a fixed or flexible exchange rate?
Q2) If the government increases spending and the central bank simultaneously increases the money supply, what will be the impact on GDP, the real interest rate, and the exchange rate in a large open economy?
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