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Imagine the U.S. economy is in long-run equilibrium. Then suppose the value of the U.S. dollar increases. At the same time, people in the U.S. revise their expectations so that the expected price level falls. We would expect that in the short-run1)the price level will fall, and real GDP might rise, fall, or stay the same.2)real GDP will fall and the price level might rise, fall, or stay the same.3)the price level will rise, and real GDP might rise, fall, or stay the same.4)real GDP will rise and the price level might rise, fall, or stay the same.

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