A central bank whose sole purpose is to stabilize price growth will never cooperate with an expansionist fiscal policy. Starting at equilibrium and in the context of the national income identity, a sudden increase in private investment holding the government budget deficit fixed implies a trade surplus. Consider an economy that is open to international trade and in which the domestic real interest rate matches the average world interest rate. In the context of the loanable funds market if there are no restrictions on capital movements across borders, an increase in taxes while government spending remains fixed will lead to an appreciation of the real exchange rate.

Central bank is the apex Bank of the nation. The major aim of the central bank is to bring stability…

Answered: A central bank whose sole purpose is to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A central bank whose sole purpose is to stabilize price growth will never cooperate with an expansionist fiscal policy.
Starting at equilibrium and in the context of the national income identity, a sudden increase in private investment holding the government budget deficit fixed implies a trade surplus.
Consider an economy that is open to international trade and in which the domestic real interest rate matches the average world interest rate. In the context of the loanable funds market if there are no restrictions on capital movements across borders, an increase in taxes while government spending remains fixed will lead to an appreciation of the real exchange rate.

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