Initially, there is a trade surplus in an open economy with a perfect capital mobility and...

Initially, there is a trade surplus in an open economy with a perfect capital mobility and a world interest rate r^w. Suppose the government reduces her expenditure. How does the reduction in the government expenditure affect net capital outflow, exchange rate, and net exports? Answer with the aid of the supply-and-demand diagram for the foreign-currency exchange market.

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Rahul Sunny answered 1 year ago

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