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thanks Under a fixed exchange rate, suppose that the economy initially stays at the long-run equilibrium of fullemployment output level. After permanent fiscal expansion, when
thanks Under a fixed exchange rate, suppose that the economy initially stays at the long-run equilibrium of fullemployment output level. After permanent fiscal expansion, when the economy adjusts from its short-run equilibrium to the new long-run equilibrium, DD remains unchanged: AA shifts back to its position in the initial long-run equilibrium. DD shifts to the left: AA shifts up. Both DD and AA shift back to their positions in the initial long-run equilibrium: DD shifts back to its position in the initial long-run equilibrium: AA remains unchanged. DD remains unchanged; AA shifts down. Question 45 (1 point) Under a fixed exchange rate, suppose that the economy initially stays at the long-run equilibrium of fullemployment output level. After permanent fiscal expansion, the economy first reaches its short-run equilibrium, and then adjusts to its new long-run equilibrium. Compared to the short-run equilibrium, we find that the new long-run equilibrium has a higher output level and the same nominal exchange rate, E. the same output level and a higher nominal exchange rate, E. a higher output level and a lower nominal exchange rate, E. a lower output level and the same nominal exchange rate, E. a lower output level and a lower nominal exchange rate, E
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