8.Consider the dynamic model with a non-traded good, and adopt the standard assumptions. Provide an example of an exogenous change in output where, in the current period, net exports are unchanged and the domestic currency depreciates. For this particular exogenous change, answer parts (a) to (d).

(a) What is the particular exogenous change that has these effects? Write it down in one sentence.

(b) With this exogenous change, discuss the effects on traded-good consumption in the current period.

(c) Write out the equation for net exports in words, and explain why net exports do not change with this exogenous change.

(d) Comment on why the depreciation of the domestic currency has no effect on net exports.