Problem
1. Using the DD-AA model, analyze the output and balance of payments effects of an import tariff under fixed exchange rates. What would happen if all countries in the world simultaneously tried to improve employment and the balance of payments by imposing tariffs?
2. When a central bank devalues after a balance of payments crisis, it usually gains foreign reserves. Can this capital inflow be explained using our model? What would happen if the market believed another devaluation was to occur in the near future?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.