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Roar Roar
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6 years ago
Assume that policy makers are pursuing a fixed exchange rate regime. Assume that the economy is initially operating at the natural level (i.e., Y = Yn). Suppose a reduction in wealth causes households to reduce consumption. This wealth-induced decrease in consumption will cause which of the following to occur?
A) the real exchange rate will be permanently higher in the medium run.
B) the real exchange rate will be permanently lower in the medium run.
C) the effects of this devaluation on the real exchange rate will be ambiguous in the medium run.
D) the real exchange rate will be unchanged in the medium run.
Textbook 
Macroeconomics

Macroeconomics


Edition: 6th
Authors:
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vonCOLLINZOvonCOLLINZO
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6 years ago
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Roar Author
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6 years ago
Thanks
acaruso
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Yesterday
Good timing, thanks!
megan.xo
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2 hours ago
Thanks for your help!!
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