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The Classical Dichotomy and the RER Briefly discuss the effects (if any) of the following in the long run on the rear exchange rate and

The Classical Dichotomy and the RER

Briefly discuss the effects (if any) of the following in the long run on the rear exchange rate and

the country's net exports. (Hint: According to the classical dichotomy, what were the effects of

nominal variables on real variables?)

a) The Fed increases the money supply, resulting in an increase in the price level.

b) The country devalues the nominal exchange rate (makes the currency weaker).

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