Small open economies-fixed and flex-Mundell-Fleming model

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Reference no: EM13837101

Two small open economies, Fixed and Flex, can be described by the Mundell-Fleming model. The countries are otherwise identical except that Fixed maintains a fixed exchange rate, while Flex maintains a flexible exchange-rate regime. The governments of both countries increase spending by the same amount. Compare what happens in the two countries to:

a) the exchange rate

b) equilibrium output

c) net exports

Reference no: EM13837101

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