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(d) Write down the national income identity. Assume again that output returns to its natural level in the medium run. If NX decreases to zero,
(d) Write down the national income identity. Assume again that output returns to its natural level in the medium run. If NX decreases to zero, what must happen to domestic demand in the medium run? What government policies are available to affect domestic demand in the medium run? Identify which components of domestic demand each of these policies affect. Explain your answer. (25 marks)
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