Essay
Using the IS-LM model for a small open economy,analyze the effects of the following events on output and the real interest rate in the short run and the long run.In each case,discuss the differences between the classical and the Keynesian models.
a.A rise in taxes.
b.A boom in the economy of the major trading partner.
c.The central bank follows a contractionary monetary policy.
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a.A rise in taxes will shift the IS curv...View Answer
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