Use the long-run classical model of a small open economy to graphically illustrate and explain...
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Accounting
Use the long-run classical model of a small open economy to graphically illustrate and explain the impact of a domestic expansionary fiscal policy on the exchange rate and the trade balance of a small economy. Assume that the small open economy starts from a position of trade deficit. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; and v. the new long-run equilibrium values.
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