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2) Peg the export price Let's say that a country, Exportia, has only one export good, Commodity, and it fixes its exchange rate, in pesos
2) Peg the export price Let's say that a country, Exportia, has only one export good, Commodity, and it fixes its exchange rate, in pesos per dollar, to the price of Commodity. a) Let's say that the price of Commodity falls by 5% in dollar terms. By how much should the exchange rate appreciate or depreciate? b) What happens to the peso price of Commodity as a result? c) What happens to exports (in terms of pesos) as a result? d) What happens to the total value of imports (in terms of pesos) as a result of this exchange rate policy? e) What happens to the trade deficit (in pesos) as a result of this policy
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