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IS LM BP model, increase in expected depreciation, imperfect capital immobility. Please answer part a and b. Assume that there is imperfect capital immobility and

IS LM BP model, increase in expected depreciation, imperfect capital immobility. Please answer part a and b.

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Assume that there is imperfect capital immobility and there is an increase in the expected depreciation of the domestic currency. Originally suppose that the home economy is at the long run equilibrium. Show the impact of this on the domestic economy in the SR by using IS LM-BP framework under i. Fixed exchange rates ii. Flexible exchange rates Carefully discuss what happens to the domestic income and interest rates as well as external ance and exchange rates in each case. b. Show the impact of this on the domestic economy in the medium run by using AS AD-LRAS framework under i. Fixed exchange rates It. Flexible exchange rates Carefully explain your diagrams as well as how the economy would return to its long-run equilibrium in both cases

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