Consider a country with a fixed exchange rate that is experiencing a deficit in it overall payments balance. Show graphically (using IS-LM-FE) and explain how a change in domestic monetary policy could attempt to quickly eliminate the payments deficit. What could be a possible threat to the economy due to the policy change?

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The Answer of Consider a country with a fixed exchange rate that is experiencing a deficit in it overall payments balance. Show graphically (using IS-LM-FE) and explain how a change in domestic monetary policy could attempt to quickly eliminate the payments deficit. What could be a possible threat to the economy due to the policy change?

Consider a Country with a Fixed Exchange Rate That Is