Question: In addition to depending on the exchange rate (and therefore on the interest rate), imports may depend on short-run output: when the economy is booming,

In addition to depending on the exchange rate (and therefore on the interest rate), imports may depend on short-run output: when the economy is booming, consumers tend to demand more foreign goods. To incorporate this result into our short-run model, suppose the new net exports equation is

Derive the IS curve with this new equation, and explain how it differs from the standard IS curve in the short-run model.

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