Use the Mundell Fleming model (draw the appropriate graphs and
show on the graphs as well) to predict what would happen to
aggregate income, the exchange rate, and the trade balance under
both floating and fixed exchange rates in response to each of the
following shocks in a small open economy.
a. A fall in consumer confidence about the future induces
consumers to spend less and save more. b. The introduction of a
stylish line of Toyotas makes some consumers...