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ASSIGNMENT

1. Find expression

We know that: or

Which and ;

And: ;

So:

2. The answer is (d) Net exports are decreased, which hurts aggregate demand.

3. The fives factors which countries may decide to hold more foreign exchange reserves,
according to the article, “Foreign Exchange Reserves in East Asia: Why the High
Demand?” are:

 The size of international financial transaction

 The Volatility of International receipt and payment
 Vulnerability to external shock
 The Government’s desire to smooth consumption when it faces
difficulty raising fund
 Loss aversion