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C. Draw an IS LM - UIP diagram for this economy. If the devaluation is credible, how does the expected exchange rate change? How does

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C. Draw an IS LM - UIP diagram for this economy. If the devaluation is credible, how does the expected exchange rate change? How does the change in the expected exchange rate affect the UIP curve? [Hint I would suggest you to write the UIP equation such as to express the interest rate as a function of the exchange rate] 61. Does the devaluation affect the IS curve? Why or why not

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