Economic expansion throughout the rest of the world raises

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Economic expansion throughout the rest of the world raises the world interest rate. Use the Mundell–Fleming model to illustrate graphically the impact of an increase in the world interest rate on the exchange rate and level of output in a small open economy with a floating-exchange-rate system. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium levels; iv. the direction the curves shift; and v. the new short-run equilibrium.

Reference no: EM131113070

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