Using the IS/LM/BP Framework, Explain How Two of the Following

question 9

Essay

Using the IS/LM/BP framework, explain how two of the following shocks impact on the domestic economy under flexible exchange rates and under fixed exchange rates.
(a) an increase in the foreign rate of interest
(b) a decrease in foreign income
(c) a decrease in foreign prices

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Definitions:

Short-term Storage

The part of the memory system that is responsible for temporarily holding information.

Working Memory

The part of short-term memory that is responsible for temporarily holding and processing information necessary for cognitive tasks.

Active Processing

Active Processing is the cognitive act of engaging with information in a meaningful way to ensure its storage, understanding, and retrieval from memory.

Short-term Memory

The capacity for holding a small amount of information in an active, readily available state for a short period of time.