* The accompanying diagram shows an AD/AS diagram. The economy begins at Eo with output equal to Y . Suppose this is an open economy where financial capital is internationally mobile. The government in this economy increases G and finances it by running a deficit (borrowing). The AD curve shifts to the right. Compared to what would happen if this were a closed economy, describe the additional effect that takes place in an open economy. Foreign financial capital flows directly leading to this economy, most If this effect is sustained over several months or longer, it will most directly cause this country's Price Level 0 E2 EO Real GDP AS' AS AD' -AD

* The accompanying diagram shows an AD/AS diagram. The economy begins at Eo with output equal to Y . Suppose this is an open economy where financial capital is internationally mobile. The government in this economy increases G and finances it by running a deficit (borrowing). The AD curve shifts to the right. Compared to what would happen if this were a closed economy, describe the additional effect that takes place in an open economy. Foreign financial capital flows directly leading to this economy, most If this effect is sustained over several months or longer, it will most directly cause this country's Price Level 0 E2 EO Real GDP AS' AS AD' -AD

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Solve all this question......you will not solve all questions then I will give you down?? upvote..

*
The accompanying diagram shows an AD/AS diagram. The
economy begins at E₁ with output equal to Y*. Suppose this
is an open economy where financial capital is internationally
mobile. The government in this economy increases G and
finances it by running a deficit (borrowing). The AD curve
shifts to the right.
Compared to what would happen if this were a closed
economy, describe the additional effect that takes place in an
open economy.
Foreign financial capital flows
directly leading to
this economy, most
If this effect is
sustained over several months or longer, it will most directly
cause this country's
Price Level
0
=O
Real GDP
AS'
AS
-AD'
-AD

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Step 1: Describe in brief the differences between an open and a closed economy

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Step 2: Describe the additional effect that takes place in an open economy.

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Step 3: Describe what happens to foreign financial capital flows if the economy were closed

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Step 4: Explain the consequence of this effect on the foreign financial capital flows

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Step 5: Explain the consequences if this effect is sustained

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