Our model takes the price level P as given in the short run, but in reality the

Question:

Our model takes the price level P as given in the short run, but in reality the currency appreciation caused by a permanent fiscal expansion might cause P to fall a bit by lowering some import prices. If P can fall slightly as a result of a permanent fiscal expansion, is it still true that there are no output effects? (As above, assume an initial long-run equilibrium.)

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

International Economics Theory and Policy

ISBN: 978-0273754206

9th Edition

Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz

Question Posted: