Discussed the case of nation experiencing capital flight

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In class, we discussed the case of a nation experiencing capital flight. Let's imagine the world contains only two nations and that one of them is experiencing capital flight. In the diagram, below trace out the effect of this capital flight on the other nation. Indicate whether the real interest rate and the real exchange rate rise, fall, or stay the same.

REAL INTEREST RATE ________ REAL EXCHANGE RATE ________

Reference no: EM131097618

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