Question
Asked Apr 11, 2019
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The current account responds to changes in:

 

 

A)

the interest rate

 

B)

the nominal exchange rate.

 

C)

both the nominal and real exchange rates.

 

D)

the real exchange rate.

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Expert Answer

Step 1

Nominal exchange rate is just the relative prices of two currencies. It is governed by monetary policies of the countries in question and doesn't really affect trade balance/ cuurent account.

Real exchange rate, on the other hand, &n...

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