For each of the following situations, use the IS-LM-FX model to illustrate the effects of the shock and the policy response. (Note: Assume the government responds by using monetary policy to stabilize output.) For each case, state the effect of the shock on the following variables (increase, decrease, no change, or ambiguous): Y, i, E, C, I, TB. Assume the government allows the exchange rate to float and makes no policy response a. Foreign Output Increases b. Investors expect an appreciation of the home currency in the future c. The home money supply decreases d. Government spending at home

For each of the following situations, use the IS-LM-FX model to illustrate the effects of the shock and the policy response. (Note: Assume the government responds by using monetary policy to stabilize output.) For each case, state the effect of the shock on the following variables (increase, decrease, no change, or ambiguous): Y, i, E, C, I, TB. Assume the government allows the exchange rate to float and makes no policy response a. Foreign Output Increases b. Investors expect an appreciation of the home currency in the future c. The home money supply decreases d. Government spending at home

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The correct answer turned out to be AA and DD will Shift. Now it's asking me to draw new AA and DD lines.
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