Might cause the world interest rate to rise

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Reference no: EM139248

Q. The mundell-fleming model takes the world interest rate r* as an exogenous variable. Let's consider Illustrate what happens when this variable changes

a) Illustrate what might cause the world interest rate to rise?

b) In the mundell-fleming model with a floating exchanges rate, Illustrate what happens to aggregate income the exchange rate, and the trade balance when the world interest rate rises?

c) In the mundell-Fleming model with a fixed exchange rate, Illustrate what happens to aggregate income, the exchange rate, and the trade balance when the world interest rate rises? Elucidate your answer include all graphs that explain how your answer is related.

Reference no: EM139248

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