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Effects of Restrictive Fiscal Policy by ron is a document available to read on EtoBox.
1) Expansionary monetary policy will stimulate domestic investment and increase net exports under a flexible exchange rate system. 2) Restrictive fiscal policy is likely to cause an appreciation of the domestic currency in a model with flexible exchange rates and perfect capital mobility. 3) In an IS-LM model with flexible exchange rates and perfect capital mobility, expansionary fiscal policy will ultimately cause a depreciation of the domestic currency.
- Author
- ron
- Language
- EN