Macroeconomic model with imperfect capital mobility

Assignment Help Business Economics

Reference no: EM132080597

a) In the IS-LM-FE (Mundell-Fleming) open-economy macroeconomic model with imperfect capital mobility, what does the term 'imperfect capital mobility' actually mean? (Clue: why is the FE curve not drawn horizontal?)

b) In the IS-LM-FE (Mundell-Fleming) open-economy macroeconomic model with imperfect capital mobility, explain what happens to the FE curve when the domestic currency appreciates on the foreign exchange market. (Do not merely state what happens. Explain clearly why it happens.)

c) Using diagrams, explain the consequences of a fiscal expansion funded by bond sales, within an economy operating under the assumptions of the IS-LM-FE (Mundell-Fleming) open-economy macroeconomic model with imperfect capital mobility and floating exchange rates,

(i) when the FE curve is more interest elastic than the LM curve.

(ii) when the LM curve is more interest elastic than the FE curve.

In each case, compare the predictions of each version of the model with those of the closed economy IS-LM model.

d) Which of the versions of the model discussed in part c) is more applicable to an economy with a central bank managing liquidity to maintain a constant policy interest rate? Explain your selection.

Reference no: EM132080597

Questions Cloud

What is the importance of sustainability for corporations : What is the importance of sustainability for corporations? What role can human resource management play in this effort?

Describe what strengths you would like your partner to have : Imagine you are working with a partner to plan and host a workshop on leadership. There will be 100 people attending.

What is the information you would want to have in the plan : How would you outline your plan (what is the information you would want to have in the plan)?

College of business administration at state university : John has graduated from the College of Business Administration at State University and has joined his family's small business

Macroeconomic model with imperfect capital mobility : In the IS-LM-FE (Mundell-Fleming) open-economy macroeconomic model with imperfect capital mobility, what does the term 'imperfect capital mobility

Effectiveness from the customer perspective : Discuss the mission statements and their effectiveness from the customer's perspective.

Explain the characteristics market structure : Explain the characteristics this market structure and what happens to the Forey Inc's profit in the short-run and long-run.

Explain the pricing strategy you would use for a business : Within your response, you should also identify three (3) objectives this strategy seeks to achieve.

What is the purpose of having job descriptions in staffing : What is the purpose of having job descriptions in staffing? What should be included in a good job description?

User Account

All Pages