1 2 a. Are your conclusions in (1) and (2) consistent with Mankiw's conclusion using the IS-LM diagram drawn in exchange rate-Output axes? Discuss. Consider a floating exchange rate regime. How does higher government purchases affect output and interest rate in equilibrium? Answer and discuss with the help of the diagram given above (e.g., show what curves will shift, label curves and axes correctly). Consider a fixed exchange rate regime. How does higher government expenditure affect output and interest rate in equilibrium? Discuss with the help of the diagram above (e.g., show what curves will shift, label curves and axes correctly).

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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1
2
a.
Are your conclusions in (1) and (2) consistent with Mankiw's conclusion using the IS-LM
diagram drawn in exchange rate-Output axes? Discuss.
Consider a floating exchange rate regime. How does higher government purchases affect output
and interest rate in equilibrium? Answer and discuss with the help of the diagram given above
(e.g., show what curves will shift, label curves and axes correctly).
Consider a fixed exchange rate regime. How does higher government expenditure affect output
and interest rate in equilibrium? Discuss with the help of the diagram above (e.g., show what
curves will shift, label curves and axes correctly).
Transcribed Image Text:1 2 a. Are your conclusions in (1) and (2) consistent with Mankiw's conclusion using the IS-LM diagram drawn in exchange rate-Output axes? Discuss. Consider a floating exchange rate regime. How does higher government purchases affect output and interest rate in equilibrium? Answer and discuss with the help of the diagram given above (e.g., show what curves will shift, label curves and axes correctly). Consider a fixed exchange rate regime. How does higher government expenditure affect output and interest rate in equilibrium? Discuss with the help of the diagram above (e.g., show what curves will shift, label curves and axes correctly).
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