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<br/>1)     Use IS-LM-FX diagram to show in the product market, Money

market, and the foreign market for home country. Label your graphs and use solid lines. Suppose the home country imposes a tariff that significantly reduces its imports. How would that affect the current account ? Using dashed lines for any shifted curves, show how this would affect interest rate, income and exchange rate? (10p)






a.      Suppose that the above tariff was expected to be permanent. How would this affect future Exchange rate. Show how this would directly affect the IS-LM-FX ? What happens to current account? (5p)




b.      Suppose instead that the exchange rate was fixed. Show how this would directly affect the IS-LM-FX ? (5p)

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6) Use IS-LM-FX diagram to show in the product market,
Money market, and the foreign market for home country.
Label your graphs and use solid lines. Suppose the home
country imposes a tariff that significantly reduces its
imports. How would that affect the current account ?
Using dashed lines for any shifted curves, show how this
would affect interest rate, income and exchange rate?
(10p)
a. Suppose that the above tariff was expected to be
permanent. How would this affect future Exchange rate.
Show how this would directly affect the IS-LM-FX ?
What happens to current account? (5p)
b. Suppose instead that the exchange rate was fixed. Show
how this would directly affect the IS-LM-FX ? (5p)
Subject: Business, Economics

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