Impact on the exchange rate and gross domestic product

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Due to the expected economic downturn following the recent pandemic in the year 2020, the Malaysian central bank had reduced the interest rate (specifically Overnight Policy Rate or OPR) in the market. Illustrate the impacts on the exchange rate and gross domestic product (GDP), ceteris paribus, by using the Mundell-Fleming model. Should Malaysia adopt fixed exchange rate in this case? Include an appropriate diagram in your answer.

Reference no: EM132601212

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