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Consider a country that is initially in equilibrium and that has a fixed exchange rate. The country has a trade deficit that it is determined
Consider a country that is initially in equilibrium and that has a fixed exchange rate. The country has a trade deficit that it is determined to eliminate. Is there a combination of policies that the country can follow that will allow it to maintain the fixed exchange rate, allow it to lower its trade deficit, and maintain the output level? Explain.
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