Question

1. Mundell Fleming model is a model in the following subfield of Economics

   		Econometrics
   		Microeconomics
   		Open Economy Macroeconomics
   		Contract Theory

10 points   

QUESTION 7

1. If the positive growth in output is greater than the positive growth in exchange rate

   		The current account surplus will be effected positively
   		The current account surplus will be effected negatively
   		The capital account surplus will be effected negatively
   		The current account surplus remains in inital equilibrium

10 points   

QUESTION 8

1. An expansionary fiscal policy finds its inital effect

   		in the right and downward shift of the LM curve
   		in the left and upward shift of the LM curve
   		in the right and upward shift of the IS curve
   		in the left and upward shift of the IS curve

Answer 1

Open economy macroeconomics. This is because the model is used to display the exchange rate mechanism and the open market economy under both fixed and flexible exchange rates

Current account surplus will be affected positively. Greater growth of output relative to exchange rate means exchange rate will depreciate and net exports will increase. This will result in current account surplus

Third option. Right an upward shift of the IS curve. This is because fiscal expansion takes the form of increase in government spending or reduction in taxes. By this there is an increase in disposable income at each interest rate.