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The Danish krone is currently pegged to the euro. Using the IS-LM-FX model for Home (Denmark) and Foreign (Eurozone), illustrate how each of the following
The Danish krone is currently pegged to the euro. Using the IS-LM-FX model for Home (Denmark) and Foreign (Eurozone), illustrate how each of the following scenarios affect Denmark:
The Eurozone reduces its money supply.
aDenmark's economy will start expanding.
bDenmark's economy will not be affected.
c Denmark's economy will enter in a recession.
dDenmark's economy will start expanding in the short run and then will contract.
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