* The accompanying diagram shows an AD/AS diagram. The economy begins at Eo with output equal to Y . Suppose this is an open economy where financial capital is internationally mobile. The government in this economy increases G and finances it by running a deficit (borrowing). The AD curve shifts to the right. Compared to what would happen if this were a closed economy, describe the additional effect that takes place in an open economy. Foreign financial capital flows directly leading to this economy, most If this effect is sustained over several months or longer, it will most directly cause this country's Price Level 0 E2 EO Real GDP AS' AS AD' -AD

* The accompanying diagram shows an AD/AS diagram. The economy begins at Eo with output equal to Y . Suppose this is an open economy where financial capital is internationally mobile. The government in this economy increases G and finances it by running a deficit (borrowing). The AD curve shifts to the right. Compared to what would happen if this were a closed economy, describe the additional effect that takes place in an open economy. Foreign financial capital flows directly leading to this economy, most If this effect is sustained over several months or longer, it will most directly cause this country's Price Level 0 E2 EO Real GDP AS' AS AD' -AD

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter31: The Impacts Of Government Borrowing

Section: Chapter Questions

Problem 2SCQ: Assume an economy has a budget surplus of 1,000, private savings of 4,000, and investment of 5,000....

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