Macroeconomics 12th Edition by Rudiger Dornbusch ,Stanley Fischer,Richard Startz

Exercise 14

Consider a country that is in a position of full employment and balanced trade. The exchange rate is fixed, and capital is not mobile. Which of the following types of disturbance can be remedied with standard aggregate demand tools of stabilization Indicate in each case the impact on external and internal balance as well as the appropriate policy response.
a. A loss of export markets.
b. A reduction in saving and a corresponding increase in demand for domestic goods.
c. An increase in government spending.
d. A shift in demand from imports to domestic goods.
e. A reduction in imports with a corresponding increase in saving.