Finance Questions 70 2-2

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1. Explain the following adjustment processes from the AA-DD model.

1. Why an increase in U.S. GNP causes a dollar appreciation.
2. Why a depreciation in the real exchange rate causes GNP to rise.
3. Why contractionary fiscal policy causes a decrease in the current account deficit

 

International Finance Theory and Policy - Chapter 70: Last Updated on 1/6/08