The Mundell-Fleming model take the world interest rate i* as an
exogenous variable. What happens when this variable changes. Which
causes might drive the world interest rate up?
Assume that the world interest rate rises. What happens in the
foreign exchange market and the money market, under a fixed
exchange rate? Show graphically effects to aggregate income, the
exchange rate, and the trade balance, and give a brief
explanation.
How do authorities control the trade balance under a fixed exchange...