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Q. How can long-run values in the real exchange rate change?
Answer: A elevate in world relative demand for U.S output origins a long-run real appreciation of the dollar against the euro a fall in the real dollar/euro exchange rate.
A proportional expansion of U.S output causes a long-run real depreciation of the dollar against the euro (a rise in the real dollar/euro exchange rate).
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Q. Using a figure describing both the U.S. money market and the foreign exchange market, analyze the effects of an increase in the U.S. money supply on the dollar/euro exchange rat
Q. Explain how an increase in the real exchange rate affects exports and imports. Answer: While the real exchange rate rises domestic products are cheaper relative to
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