Please help me with this questions. Thank you 1. Using the IS–LM–FX model, illustrate how an increase in the home country’sgovernment spending affects the home country. Compare the outcome when the homecountry has a fixed exchange rate with the outcome when the home currency floats. Foreach case, state the effect of the increase in the home country’s government spending(increase, decrease, no change, or ambiguous) on the following variables: Y, i, E, C, I,TB. 2. During the 1980s, the United States experienced “twin deficits” in the currentaccount and government budget. Since 1998 the U.S. current account deficit has grownsteadily along with rising government budget deficits. Do government budget deficitslead to current account deficits? Identify other possible sources of the current accountdeficits. Do current account deficits necessarily indicate problems in the economy? 3. Suppose the Japanese government is considering two policies. One policy wouldinvolve increasing government spending, and the other would involve an expansion in themoney supply. How would each of these policies affect Japan’s own output and itsexchange rate with South Korea (E defined as won per yen)? Which of these two policieswould you expect South Korean exporters to prefer? Explain
Please help me with this questions. Thank you
1. Using the IS–LM–FX model, illustrate how an increase in the home country’s
government spending affects the home country. Compare the outcome when the home
country has a fixed exchange rate with the outcome when the home currency floats. For
each case, state the effect of the increase in the home country’s government spending
(increase, decrease, no change, or ambiguous) on the following variables: Y, i, E, C, I,
TB.
2. During the 1980s, the United States experienced “twin deficits” in the current
account and government budget. Since 1998 the U.S. current account deficit has grown
steadily along with rising government budget deficits. Do government budget deficits
lead to current account deficits? Identify other possible sources of the current account
deficits. Do current account deficits necessarily indicate problems in the economy?
3. Suppose the Japanese government is considering two policies. One policy would
involve increasing government spending, and the other would involve an expansion in the
money supply. How would each of these policies affect Japan’s own output and its
exchange rate with South Korea (E defined as won per yen)? Which of these two policies
would you expect South Korean exporters to prefer? Explain
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