Question: Suppose a flexible exchange rate There is an increase in

Suppose a flexible exchange rate. There is an increase in the degree of uncertainty in credit markets, which affects firms but not consumers, as considered in Chapter 9.
(a) Determine the effects on aggregate output, the price level, the exchange rate, and the real interest rate. Explain your results.
(b) Does this help to explain features of the financial crisis? Discuss.

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