Exchange, e Income, output, Y LM 18 Suppose that Macro Island is a small open economy with a floating exchange rate regime. Use the Mundell-Fleming model to show how each of the following events changes the equilibrium exchange rate and income. ง C LM Income, cut, Y Show Transcribed Text ASH a. The president signs a tax increase into law. The exchange rate [Select] ["decreases", "increases", "remains the same"] Income [Select] ["increases", "decreases", "remains the same"] b. The central bank sells bonds in open-market operations. The exchange rate [Select] ["decreases", "increases", "remains the same"] Income [Select] ["increases", "decreases", "remains the same"]
Exchange, e Income, output, Y LM 18 Suppose that Macro Island is a small open economy with a floating exchange rate regime. Use the Mundell-Fleming model to show how each of the following events changes the equilibrium exchange rate and income. ง C LM Income, cut, Y Show Transcribed Text ASH a. The president signs a tax increase into law. The exchange rate [Select] ["decreases", "increases", "remains the same"] Income [Select] ["increases", "decreases", "remains the same"] b. The central bank sells bonds in open-market operations. The exchange rate [Select] ["decreases", "increases", "remains the same"] Income [Select] ["increases", "decreases", "remains the same"]
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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