Question: Using IS/LM/BP analysis, trace through the effect of (a) A deflationary fiscal policy and (b) A deflationary monetary policy under (i) A fixed exchange rate;

Using IS/LM/BP analysis, trace through the effect of

(a) A deflationary fiscal policy and

(b) A deflationary monetary policy under

(i) A fixed exchange rate;

(ii) A free-floating exchange rate.

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i Fixed exchange rate a Deflationary fiscal policy A deflationary fiscal policy will shift the IS curve to the left This will cause a fall in interest ... View full answer

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