Suppose, in the second model in this chapter, with production and investment, that there is an increase
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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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The effects of an increase in credit market frictions are depicted in Figure ...View the full answer
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