While your country has an open capital account, your financial markets remain imperfectly integrated with those of the rest of the world. The central bank in your country targets the stock of domestic credit. One day, an IMF team arrives and convinces the Finance Minister that your country's fiscal deficit is excessive. The Finance Minister persuades the parliament to pass a tax increase to reduce the deficit. Explain what effect you would expect this measure to have on:

a. The aggregate price level and level of real GDP.

b. The level of employment and the real wage.

c. The level of exports, of imports, and of net exports.