Developing countries like China and India start promoting investment. Use the Mundell-Fleming model to illustrate graphically the impact of this on the exchange rate and output in a small open economy like Canada (a) A flexible exchange rate regime (b) A fixed exchange rate regime (c) Which regime would you recommend the policy maker if you are more concerned with unemployment? Why?

Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter34: International Finance
Section34.3: Fixed Exchange Rates
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Developing countries like China and India start promoting investment. Use the Mundell-Fleming model to illustrate graphically the impact of this on the exchange rate and output in a small open economy like Canada

(a) A flexible exchange rate regime

(b) A fixed exchange rate regime

(c) Which regime would you recommend the policy maker if you are more concerned with unemployment? Why?

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