Question: Question 2 (10 points) (A). Why does a temporary increase in government spending cause the current account to fall by smaller amount than does a

Question 2 (10 points) (A). Why does a temporary increase in government spending cause the current account to fall by smaller amount than does a permanent increase in government spending? [5 points] (B). What is the difference between the nominal and real exchange rate? If there is an increase in real exchange rate, how does it affect imports, exports and the current account balance? [5 points]

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