1) Consider a small country whose actions does not affect the world interest rate. Draw a...

1) Consider a small country whose actions does not affect the world interest rate. Draw a loanable funds market for the country and analyze how Net Export and Net Capital Outflow changes when the following happens. Draw different graphs for each case.

a) The country’s government implements a policy to lower income taxes while keeping the government budget unaffected

b) The US (a powerhouse in the World market) implements a contractionary monetary policy to raise interest rate

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Expert Solution

Rahul Sunny answered 1 month ago

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