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What is the effect of the current account surplus

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Reference no: EM133115711

Assume that a small open economy with complete capital controls is running a current account surplus of $800 million a year. Answer the following questions.

a. What is the effect of the current account surplus on the money supply and the price level if the exchange rate is fixed?

b. What is the effect of the current account surplus on the money supply and the price level if the exchange rate is flexible?

Reference no: EM133115711

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