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    As an economist, you know that when a country depreciates its currency, initially its competitiveness in the world markets increases. You also know that currency appreciation improves the prospects of foreign investments which will likely increase GDP. The head of state has turned to you for your wise council. Why would you be reluctant to advise that your country increases its money supply?

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    Increasing the money supply can have drastic impact on the economy. Increasing the money supply will ...

    Solution Summary

    The solution clearly and concisely provides an answer to the problem regarding appreciation and depreciation. A brief answer is given which helps for students who are just looking to confirm their understanding of the problem.