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Storms can strengthen as it travels through an ocean. In order to prevent damages, the government has to increase its spending to prepare its residents.

Storms can strengthen as it travels through an ocean. In order to prevent damages, the government has to increase its spending to prepare its residents.

a. Suppose that this storm significantly affects only one country. Can you explain how the trade balance and the real exchange rate of this small open economy will be affected by these increases in government spending? How will this look like in a figure or graph?

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