Suppose that higher income implies higher imports and thus lower net exports. That is, the net exports
Question:
NX = NX (e, Y).
Examine the effects in a small open economy of a fiscal expansion on income and the trade balance under
a. A floating exchange rate.
b. A fixed exchange rate.
How does your answer compare to the results in Table 12-1?
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Related Book For
Macroeconomics
ISBN: 978-1464168505
5th Canadian Edition
Authors: N. Gregory Mankiw, William M. Scarth
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