are five categories of agents:firms,houscholds,commercialbanks,the central bank,and the goverment.The world price of the foreign good is taken asexogenous and normalized to unity.The nominal exchange rate is fixed at E.The supply of the domestic good is given by(1)Y=YPD).where p is the price of the domestic good and Y"=dY"/dpb>0.
Fig: 1
Fig: 2