Assume that policy makers are pursuing a fixed exchange rate regime. Assume that the economy is initially operating at the natural level (i.e., Y = Yn). Suppose a reduction in wealth causes households to reduce consumption. This wealth-induced decrease in consumption will cause which of the following to occur?
A) The real exchange rate will be permanently higher in the medium run.
B) The real exchange rate will be permanently lower in the medium run.
C) The effects of this devaluation on the real exchange rate will be ambiguous in the medium run.
D) The real exchange rate will be unchanged in the medium run.
B
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b. We cant find enough things to do to fill our day
c. There is too much variety
d. There is too much available
e. There are too many TV channels
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What will be an ideal response?
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