Using the IS-LM Model for a Small Open Economy,analyze the Effects

question 76

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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Definitions:

Bona Fide Purchaser

A person who buys something in good faith without notice of any previous claim or lien against the property.

Good Title

A rightful or legitimate claim to the ownership of property or legal recognition of the ownership of property.

Security Interest

A legal claim or right on property as collateral to secure the performance of an obligation, usually the repayment of a debt.