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Draw graphs by hand please, no words just graphs. Question 2: [25 marks| 1. Show the short run effects of a foreign fiscal expansion on
Draw graphs by hand please, no words just graphs.
Question 2: [25 marks| 1. Show the short run effects of a foreign fiscal expansion on an open economy that is on a Hexible exchange rate. To answer this question, draw the following five diagrams: (a) The goods market, (b) The money market, (c) The IS-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 IS-LM curves. Provide brief explanations for the changesStep by Step Solution
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