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1.Suppose that policymakers in Mexico , a small open economy with a flexible exchange rate, wish to raise the level of domestic investment (I) without

1.Suppose that policymakers inMexico, a small open economy with aflexibleexchange rate, wish toraise the level of domestic investment (I)withoutchanging its net exports(NX=0). Goal: I and NX=0.

1A. What is theMexicandomestic policythat would keepnet exports unchanged? [Hint: choose between a fiscal, monetary or trade policy].

Explain your choice.

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