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Chapter 7 (When the trade balance decreases at any given level of the real…
Chapter 7
When the trade balance decreases at any given level of the real exchange rate, the trade balance function shifts down.
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The downward slope of the demand curve reflects the inverse relationship between the demand for real money balances and the nominal interest rate at a given level of real income (Y).
The interest rate increases when contractionary monetary policy is implemented under a floating exchange rate regime.
When the trade balance increases at any given level of the real exchange rate, the trade balance function shifts up.
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vMonetary policy is economic policy undertaken by the Federal Reserve to implement changes in the money supply.
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The money market is in equilibrium when the demand for real money balances equals the real money supply.
The trade balance increases when contractionary fiscal policy is implemented under a floating exchange rate regime.
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Any type of shock that decreases demand at a given level of output will shift the IS curve to the left.
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