a) In the open economy ISLM model, describe the effects of fiscal and monetary ex-pansions with fixed and flexible exchange rates using diagrams. Compare alsothe effects of a fiscal expansion in an open economy ISLM model with fixed ex-change rates to a fiscal expansion in a closed economy ISLM model.b) Explain the differences of how the labour supply decision is made for householdsand how it is made for unions. Is it the case that the existence of unions alwaysincreases unemployment?c) Describe how the aggregate demand schedule is derived in the ASAD model un-der both fixed and flexible exchange rates. In which of the two can the position ofthe long-run AD schedule be changed by domestic policy?

“Since you have posted multiple questions, we will provide the solution only to the first question…

a) In the open economy ISLM model, describe the effects of fiscal and monetary ex- pansions with fixed and flexible exchange rates using diagrams. Compare also the effects of a fiscal expansion in an open economy ISLM model with fixed ex- change rates to a fiscal expansion in a closed economy ISLM model.

a) In the open economy ISLM model, describe the effects of fiscal and monetary ex- pansions with fixed and flexible exchange rates using diagrams. Compare also the effects of a fiscal expansion in an open economy ISLM model with fixed ex- change rates to a fiscal expansion in a closed economy ISLM model.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 21SCQ: Explain briefly whether each of the following would be more likely to lead to a higher level of...

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