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If you could also explain why the following variables changed as well! 2. (30 points). For each of the following scenarios, assume the economy experiences
If you could also explain why the following variables changed as well!
2. (30 points). For each of the following scenarios, assume the economy experiences an exogenous decrease in investment demand. For each case, illustrate the IS-LM-FX diagram and state the effect of the shock (increase, decrease, no change, or ambiguous) on the following variables: Y,i,E,C,I,TB. Here, we assume the policy makers' objective is to keep output fixed at its initial value. a. Monetary policy response under a floating exchange rate regime. b. Fiscal policy response under a floating exchange rate regime. c. Monetary policy response under a fixed exchange rate regime. d. Fiscal policy response under a fixed exchange rate regimeStep by Step Solution
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