Economy with a flexible exchange rate

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Consider the determination of real exchange rates in a large open economy with a flexible exchange rate regime. If today's technology increase, e* will. If tomorrow's technology is expected to improve, e* will. If M decreases, e* will. If the government decreases G1 while keeps G2 unchanged, e* will.

Note: For each of the above blanks, fill in one of the following three choices: A. increase; B. decrease; C. stay; D. none of A, B, and C.
Hint: You may want to read the slides for the loanable funds market, the FE-IS-LM model, and the open macroeconomics.

Reference no: EM132501352

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