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Suppose exchange rate is defined as the number of units of domestic currency per unit of the foreign currency. Let us also suppose that an
Suppose exchange rate is defined as the number of units of domestic currency per unit of the foreign currency. Let us also suppose that an economy implements a flexible exchange rate policy. Then according to the monetary approach to exchange rate theory, a rise in the growth rate of foreign output will cause
a. exchange rate to fall.
b. exchange rate to rise.
c. exchange rate to remain constant.
d. uncertain.
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