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Brexit has led to the relocation of many multinational companies from the United Kingdom to continental Europe. This has in turn reduced the demand for

Brexit has led to the relocation of many multinational companies from the United Kingdom to continental Europe. This has in turn reduced the demand for real estate and many other local goods and services in the country on a long-term basis.

(a)What is the likely long-run impact of the change in the demand for local goods and services on the real exchange rate of the British pound? Please explain your answer using the model(s) of exchange rate determination. [10]

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