The domestic central bank increases the supply of money under a flexible exchange rate regime, leading to a depreciation of the nominal exchange rate. If the government had imposed capital controls before the increase in the money supply, would this have had any effect on the exchange rate depreciation? Explain your results, and comment on their significance. If the government had imposed capital controls before the increase in the money supply, the effect on the nominal exchange rate would because an increase in money supply results in aggregate output and the current account. Therefore, capital controls have on the nominal exchange rate and domestic price level in this scenario