Show the short run effects of an increase in consumer confidence on an open economy that...

Show the short run effects of an increase in consumer confidence on an open economy that is on a flexible exchange rate. (Hint: an increase in consumer confidence will increase autonomous consumption spending). To answer this question, draw the following five diagrams:

1. The goods market

2. The money market

3. The IS-LM curves

4. The interest parity condition

5. The AS-AD curves

Label the initial and new equilibrium points on each diagram. Provide brief explanations for the changes

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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