Question: Suppose, in the second model in this chapter, with production and investment, that there is an increase in credit market frictions, as studied in Chapter.

Suppose, in the second model in this chapter, with production and investment, that there is an increase in credit market frictions, as studied in Chapter. What are the effects on aggregate output and the current account surplus? Comment on these effects, as they relate to U.S. experience during the financial crisis and the recent recession.

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