Answer to Question #325489 in Macroeconomics for Li Zhang

Question

Using an IS-LM model of the macroeconomy that is open to international trade, and in which there is perfect capital mobility, draw diagrams for the goods market, money market and the IS-LM together showing the effect of an expansionary fiscal policy for the case of a flexible exchange rate regime in the short run. Remember to label clearly the axes and the direction of any changes Explain briefly the effect on the trade balance.

Answer 1

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