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Compare the short-run effectiveness of fiscal contraction under (a) flexibleexchange rates and (b) fixed exchange rates. Use the open economy IS*-LM along with the uncovered

Compare the short-run effectiveness of fiscal contraction under (a) flexibleexchange rates and (b) fixed exchange rates. Use the open economy IS*-LM along with the uncovered interest parity condition. Explain the detailedreasoning in each case.

Finally, summarize the changes in each case for:

Domestic interest rates

Nominal exchange rates

Real GDP

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