The rising international integration of economies, dubbed 'globalization', has led to increasing competitive pressure. Suppose that the
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The rising international integration of economies, dubbed 'globalization', has led to increasing competitive pressure. Suppose that the resultant import competition has curtailed domestic firms' ability to mark-up their prices. Explain and illustrate the short-run and medium-run impacts of this development using the IS-LM-PC model. In so doing, explain globalisation's impact on the Phillips Curve by tracing its effect back to the associated changes in Blanchard's model of the labour market. (50 marks)
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