Solved: Output and the exchange rate in the short run, Microeconomics

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Output and the exchange rate in the short run

Discussion:

Output and the Exchange Rate in the Short Run

1. The U.S has unusually high income elasticity of demand for imports. If the U.S economy had an exceptionally strong year of economic growth, what effects would this have on output and the price level?

2. Suppose that real interest rates in a county fell. What effect would this have on the real exchange rate and the current account? How this would effects equilibrium output and the price level?

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