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Analyze the effects of a increases in investment for both the fixed and flexible exchange rate cases by using the Mundell-Fleming model with the assumption of perfect capital mobility.

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter22: International Finance

Section: Chapter Questions

Problem 6QP

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Suggest an appropriate policy in order to increase national income for fixed and flexible exchange rate cases by using the Mundell-Fleming model with the assumption of perfect capital mobility.
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Contrast floating exchange rates, a soft peg, hard peg, and merged currency as options that a country’s economy has in terms of managing its exchange rate relative to the rest of the world. For each, give a benefit as well as a drawback.
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