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1.2 Assume the central bank of a country increases the repo rate. Discuss the economic impact of this decision in terms of the aggregate demand

1.2 Assume the central bank of a country increases the repo rate. Discuss the economic impact of this decision in terms of the aggregate demand approach to measuring aggregate output, paying specific attention to the impact of this decision on exchange rate fluctuations. Assume all other variables are held constant. Choose from the ONE correct diagram below to motivate your answer. (15)
(a) AE AE' Aggregate expenditure Y' Y Aggregate output

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