Question: 1. Using the DD-AA model, explain how the exchange rates, interest rates, trade balance and output adjust to their new equilibrium levels when the money

1. Using the DD-AA model, explain how the exchange rates, interest rates, trade balance and output adjust to their new equilibrium levels when the money supply decreases temporarily.

2. Using the DD-AA model, explain why a temporary fiscal expansion may be less effective than the government originally expects it to be.

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