solve 17 & 18

What happens to the economy when we are at the natural rate of GDP and the government increases spending but the Central Bank does not change the interest rate? Our imports will increase, our nominal exchange rate stays the same, and our trade deficit gets larger Our exports will increase and our nominal exchange rate stays the same, and our trade deficit reduces Our imports will reduce, our exports increase, and our trade deflcit reduces Our exports will reduce, our nominal exchange rate increase, and our trade deficit gets larger Question 18 When the interest rate decreases then what happens to the nominal exchange rate it will increase it will not change because the real exchange rate has to change it will decrease it will remain the same until the interest rate moves back to its original rate