In the Mundell–Fleming model with fixed exchange rates; i) what happens to aggregate income, the exchange rate, and the trade balance when government increases spending or reduce taxes. ii) and, what would be the result if the exchange rate is floating? graphical explantion if possible please
In the Mundell–Fleming model with fixed exchange rates; i) what happens to aggregate income, the exchange rate, and the trade balance when government increases spending or reduce taxes. ii) and, what would be the result if the exchange rate is floating? graphical explantion if possible please
Chapter18: Globalization
Section: Chapter Questions
Problem 13E
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In the Mundell–Fleming model with fixed exchange rates;
i) what happens to aggregate income, the exchange rate, and the trade balance when government increases spending or reduce taxes.
ii) and, what would be the result if the exchange rate is floating?
graphical explantion if possible please
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