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Using the Mundell-Fleming IS-LM model to Explain the effect on the domestic economy of an
increase in the foreign rate of interest of the dominant global economy. (4 points) Now consider
an open economy with free capital mobility and a fixed exchange rate. Using the Mundell-
Fleming IS-LM model

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Using the Mundell-Fleming IS-LM model to Explain the effect on the dom.docx

  • 1. Using the Mundell-Fleming IS-LM model to Explain the effect on the domestic economy of an increase in the foreign rate of interest of the dominant global economy. (4 points) Now consider an open economy with free capital mobility and a fixed exchange rate. Using the Mundell- Fleming IS-LM model