Answered: If the exchange rate were fixed rather…

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Economics

If the exchange rate were fixed rather than floating, explain what would happen to The trade balance

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter34: International Finance

Section: Chapter Questions

Problem 6QP

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Question

An economy is described by the following two equations.

Y = C (Y – T) + I (r* ) + G – NX(e)

M/P = L(r*, Y)

If the exchange rate were fixed rather than floating, explain what would happen to

The trade balance

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