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Use the diagrammatic analysis of foreign exchange equilibrium and explain the effects of a rise in...

Use the diagrammatic analysis of foreign exchange equilibrium and explain the effects of a rise in the interest rate paid on dollar deposits from R1$ to R2$. [Hint: Your answer should include an explanation of what happens to the relative attractiveness of holding deposits in the two currencies (dollars and euros) at the original exchange rate E1 $/€ and how the new equilibrium exchange rate E2 $/€ is achieved.]

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