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    Floating Exchange Rate Regime

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    Suppose that the U.S. Congress imposes an increase in taxes. Under a floating exchange rate regime, carefully illustrate and explain the process that will generate a new goods market, money market and balance of payments equilibrium. What are the effects of such a policy on domestic income and employment? Please detail the answer in 200-300 words.

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    Floating Exchange Rate Regime

    Tax Policy
    The increase in taxes by U.S. congress would cut the consumer spending and would be beneficial to resolve the crisis situations of the country. The tariff revenue would also be increased through the increase in taxes in floating exchange rate regime. The increase in the federal revenue would ...

    Solution Summary

    The solution determines the floating exchange rate regime.