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The naninal excharye guantty of ferean wrrencies per unit of nationdl cuntency rateis defined in this excersise as the ภ์ cor

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Answer 1

a) The two equations describing the Mundell-Fleming model are:-

The IS curve:

Y = C + I + G + N X

here NX is net exports.

The LM curve:

M/P = L ( i ,Y )

A higher interest rate or a lower income (GDP) level leads it to lower money demand.

The Balance of payment Curve (BOP)

BOP= CA+KA

here BOP is the balance of payments surplus,

CA is the current account surplus

KA is the capital account surplus.

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