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Could you please answer it by providing step by step solution and explanation ? I would be very grateful! (Intermediate Macroeconomic) 5. Consider a monetary

Could you please answer it by providing step by step solution and explanation? I would be very grateful! (Intermediate Macroeconomic)

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5. Consider a monetary small open economy model. Starting from equilibrium, suppose that total factor productivity increases temporarily. d. Now suppose that under a exible exchange rate regime the domestic monetary authority controls the money supply so as to stabilize the price level when total factor productivity increases. Explain the differences between the outcome in this case and what happens in part (c) with a fixed exchange rate

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