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What effect will each of the following events have on the current account balance and the exchange rate if the exchange rate is fixed? if
What effect will each of the following events have on the current account balance and the exchange rate if the exchange rate is fixed? if the exchange rate is floating?
a. Country's government cuts taxes and income rises
b. The inflation rate increases, and prices in the country rise faster than those foreign countries with which our country trades.
c. The country adopts an expansionary monetary policy. Interest rates fall (and are now lower than those in other countries) and income rises
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