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Unformatted text preview: (b) At what interest rate does external balance occur? (c) Given the interest rate derived in (b) how does the balance of trade change as the exchange rate appreciates from e = 1 to e = 2? (d) Given e = 1 and r as above, how does the balance of trade change as government expenditure increases from G = 200 to G = 300? 3. Describe and explain the effectiveness (or otherwise) of monetary and fiscal policy under fixed exchange rates using the IS-LM diagram with a vertical BP curve....
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- Spring '12