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Assume the Exchange Rate Is Allowed to Fluctuate Freely

question 46

Essay

Assume the exchange rate is allowed to fluctuate freely. Using the IS- LM- IP model, graphically illustrate and explain what effect a tax increase will have on the domestic economy. In your graphs, clearly label all curves and equilibria.


Definitions:

Consistent Trait

A characteristic or quality in an individual that is regularly observed in a wide range of situations over time.

Command-And-Control

An organizational design that emphasizes strict management and control over decision-making and worker actions.

Composite

A material made from two or more different materials that, when combined, produce a new material with characteristics different from the individual components.

Theory X

A management theory assuming that employees are inherently lazy, need constant supervision, and must be coerced or threatened with punishment to achieve goals.

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