Tut8q - the reasons behind any shifts in equilibrium that...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
ECO2004S Tutorial 8 9 October 2009 Question 1 Using the IS-LM-IP model, graphically illustrate and explain what a±ect a con- tractionary ²scal policy, by way of decreased government spending, will have on the domestic economy of. Assume that the current monetary regime allows the exchange rate to ³uctuate freely. In your graphs, clearly label all curves and equilibria. Question 2 Use the IS-LM-IP model to examine the e±ects of a contractionary ²scal policy on the open domestic economy of Po±adder. Assume that the current monetary authorities have adopted a ²xed exchange regime. Make sure you clearly explain
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: the reasons behind any shifts in equilibrium that are relevant. In your graphs, clearly label all curves and equilibria. Question 3 A certain country has an open economy, with completely free movement in capital and trade. It is currently at full employment, and allows its exchange rate to move freely. Using both an IS-LM-IP and an open economy AS-AD model, show the e±ect over both the short and medium run of an increase in government spending. 1...
View Full Document

Ask a homework question - tutors are online