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Firms in a small open economy unexpectedly increase their demand for investment. What is the impact...

Firms in a small open economy unexpectedly increase their demand for investment. What is the impact on the trade balance, the nominal exchange rate, the real exchange rate? Assume initially the small open economy has balanced trade. Use a graph similar to Figure 6-8 in your textbook to illustrate the effects. Make sure you explain what is going on.

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