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devildoc devildoc
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A month ago
The following figure shows the net exports curve for a country:





Refer to the figure above. Explain why the real exchange rate cannot stay far above R*.
Textbook 

Macroeconomics


Edition: 3rd
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jennaforierojennaforiero
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A month ago
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The real exchange rate cannot stay far above R* because large permanent trade deficits are typically unsustainable. They result in increasing debt to foreign countries, who will then start selling U.S. assets and drive down the nominal exchange rate, which in turns drives down the real exchange rate.

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devildoc Author
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Just got PERFECT on my quiz
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Good timing, thanks!
ky
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Correct Slight Smile TY
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