2. Suppose an economy with flexible exchange rates is facing a recession and unemployment. a. Describe...

2. Suppose an economy with flexible exchange rates is facing a recession and unemployment.

a. Describe in detail the mechanism that leads from a change in fiscal policy to changes in interest rates, the exchange rate, and the current account balance.

b. Do the same for monetary policy.

c. Explain which policy is more effective.

Solutions

Expert Solution

C) As explain in both figures as monetary policy lead to rise in output , so it is more effective

Rahul Sunny answered 1 year ago

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