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Good afternoon, I have this assignment question that I cannot answer: Use the three-equation model to show the new medium-run equilibrium of a member of
Good afternoon,
I have this assignment question that I cannot answer:
Use the three-equation model to show the new medium-run equilibrium of a member of a common currency area following a negative demand shock. How would medium run equilibrium output, real exchange rate and government budget balance differ from the case of a flexible exchange rate economy facing a similar shock?
I am especially stuck because I cannot seem to find an example of the AD-ERU model for a member of a CCA.
Thank you so much for your help,
Brandusa
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