[Solution] A small open economy with a floating exchange rate is initially at equilibrium A with IS*1, LM*1, equilibrium exchange rate

A small open economy with a floating exchange rate is initially at equilibrium A with IS*1, LM*1, equilibrium exchange rate e2, and equilibrium output Y 1. If there is an increase in government spending to IS*2, the new equilibrium will be at , holding everything else constant. B A

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