Question: Consider the following graph representing the total demand and supply of domestic money (d) (in the horizontal axis) depending on the exchange rate (vertical axis).

Consider the following graph representing the total demand and supply of domestic money (d) (in the horizontal axis) depending on the exchange rate (vertical axis). Which of the two lines (continuous or discontinuous) represents the initial demand for currency d? If there is a shock that reduces the attractiveness that exports from d have for country f, which line will move? Will it move up or down? What will happen to the new equilibrium exchange rate

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