Using the AA-DD framework and assuming the flexible exchange rate regime, analyse how a permanent change in tastes of domestic consumers making them to prefer domestic goods over foreign goods,would affect domestic economy in the short-run and in the long-run. Discuss what would happen to output, the nominal and real exchange rates and the current account. Assume that the economy starts in the long-run equilibrium with full employment.
Attachment:- 576840_1_ECON303-Assignment-1.pdf