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Suppose in the model that government expenditures increase temporarily. Determine the effects on aggregate output, absorpti, the current account surplus, the nominal exchange rate, and
Suppose in the model that government expenditures increase temporarily. Determine the effects on aggregate output, absorpti, the current account surplus, the nominal exchange rate, and the price level. What difference will it make if the exchange rate is flexible or fixed? In a flexible exchange rate regime, the temporary increase in government expenditures results in V aggregate output, V the current account surplus. The nominal exchange rate Y and the domestic price level absorption, and
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