The IS/LM/BP model captures the open economy explanation of the real effects of economic policy through changes

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The IS/LM/BP model captures the open economy explanation of the real effects of economic policy through changes in the exchange rate.

1). Assuming perfect capital mobility, discuss the rationale for fixing the economy's interest rate to the world interest rate

2). Using the same framework, carefully outline and critically assess the model's predictions after an increase in an economy's risk premium during a sovereign debt crisis

Related Book For answer-question

Macroeconomics Theories and Policies

ISBN: 978-0132831529

10th edition

Authors: Richard T. Froyen

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Posted Date: Mar 02, 2024 04:54 PM

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The IS/LM/BP model captures the open economy explanation of the real effects of economic policy through changes

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ISLMBP Model and Economic Policy 1 Rationale for Fixing Interest Rate with Perfect Capital Mobility In a system with perfect capital mobility meaning capital flows freely across borders in response to ... View the full answer

Macroeconomics Theories and Policies

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