Flexible exchange rate that fiscal policy

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Reference no: EM131389191

Use the Mundell-Fleming model to show for a small country with a flexible exchange rate that fiscal policy becomes less effective as international capital mobility increases. (Suggestion: use three graphs, one with q=0, one with BB steeper than the LM, and one with BB flatter than the LM. Show how policy affects the equilibrium level of output. Explain your results.)

Reference no: EM131389191

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