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Clear Graphs please and thank you! Question 3: [25 marks] 1. Show the short run effects of a fiscal contraction on an open economy that
Clear Graphs please and thank you!
Question 3: [25 marks] 1. Show the short run effects of a fiscal contraction on an open economy that is on a flexible exchange rate. To answer this question, draw the following five diagrams:(a) The goods market, (b) The money market, ) The I5-LM curves, ) ) (d) The interest parity condition, and (e) The AS-AD curves. Clearly label the initial and new equilibrium points in each diagram, as well as the reasons for all curve-shifting if applicable. Provide brief explanations for the changes. 2. How about the effects in the medium run? Assume that before the changes, the economy was at the natural level of output. To answer this question, draw the following two diagrams: (a) The AS-AD curves, and (b) The I5-LM curves. Provide brief explanations for the changes. Question 4: [25 marks| 1. Show the short run effects of a monetary contraction on an open economy that is on a flexible exchange rate. To answer this question, draw the following five diagrams: (a) The goods market, (b) The money market, () The IS-LM curves, (d) ) d (e The interest parity condition, and The AS-AD curves. Clearly label the initial and new equilibrium points in each diagram, as well as the reasons for all curve-shifting if applicable. Provide brief explanations for the changes. 2. How about the effects in the medium run? Assume that before the changes, the economy was at the natural level of output. To answer this question, draw the following two diagrams: (a) The AS-AD curves, and (b) The IS-LM curves. Provide brief explanations for the changesStep by Step Solution
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