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assume assumption balance of payments budget deficit capital movements central bank changes commercial policy creates an excess demand or excess depreciation dynamic postulates dynamic system effective under flexible effects of fiscal eliminated employment and output equilibrium exceed the slope excess demand excess supply exchange rate-output complex exports FF line FF schedule fiscal policy fixed exchange rates flexible exchange rates foreign balance schedule foreign exchange foreign trade multiplier foreign-balance schedule government spending improve employment income expansion increase in income increase in output increased investment interest rate internal balance schedule internal-balance Keynesian Laursen-and-Metzler leakage through foreign level of employment level of output locus of exchange ment monetary policy multiplier effect OUTPUT Figure Policy on Employment positive slope price of foreign quadrants reduce capital imports situation in Figure slope of XX spending on home Stability Conditions terms of trade Theory of Employment traces the locus XX curve XX exceed XX line XX schedule