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What is the impact of an expansionary fiscal policy

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Reference no: EM131901633

What is the impact of an expansionary fiscal policy when countries do not have a lot of access to international capital markets? In fact, assume that the country has zero international capital mobility (no capital flows at all). Using the Mundell-Fleming framework, what would be the impact of an increase in government spending on: GDP, the trade balance, interest rates and domestic investment? Please use algebra or diagrams to describe the impact of this policy. Please separate short-run and long-run effects of the policy.

Reference no: EM131901633

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