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The diagram to the right shows the determination of the long-run real exchange rate between Home's currency Real Exchange and Foreign's currency, gh/f. Rate, gh/f
The diagram to the right shows the determination of the long-run real exchange rate between Home's currency Real Exchange and Foreign's currency, gh/f. Rate, gh/f RS 1 RD 1 Suppose that the overall level of spending doesn't change, but Home residents decide to spend less of their income on nontraded products and more on tradables. Using the line drawing tool, assess the impact of this spending shift on qh/f- Properly label this line. an/f Carefully follow the instructions above and only draw the required object. Ratio of Hon to Foreign ( YH /Y F ) ' real output ( YH/Y F )
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