Exam 13: The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

Who fixes the quantity of real money balances in closed and open economies? In a small open economy, the interest rate R is determined by what rate?

Compared to a closed economy, an open economy is one that:

In the Mundell-Fleming model with flexible exchange rates, an increase in the price level results in a(n) ______ in the real exchange rate and a(n) ______ in net exports.

If there is a fixed-exchange-rate system, then in the long run:

The introduction of a stylish new line of Toyotas, which makes some consumers prefer foreign cars over domestic cars, will, according to the Mundell-Fleming model with floating exchange rates, lead to:

If a country chooses to have free capital flows and to conduct an independent monetary policy, then it must:

Which of the following would be evidence that a country with a fixed exchange rate has an undervalued currency?

A fall in consumer confidence about the future, which induces consumers to spend less and save more, will, according to the Mundell-Fleming model with floating exchange rates, lead to:

A speculative attack on a currency occurs when:

At the end of 1994 the Mexican government was unable to maintain a fixed exchange rate because it:

A small open economy with a floating exchange rate is initially in equilibrium at A with $I S _ { 1 } ^ { * }$ $L M _ { 1 } ^ { * } .$ If the establishment of a new government in the country decreases the risk premium, then $L M _ { 1 } ^ { * }$ will shift to _____ and $I S _ { 1 } ^ { * }$ will shift to _____.

The goods produced in U.S. industries may be made more competitive in world markets by:

In a small open economy with a fixed exchange rate, an effective policy to increase equilibrium output is to:

In a small open economy with a floating exchange rate, if the government increases the money supply, then in the new short-run equilibrium the:

Holding everything else constant, compare the impact of a monetary expansion in a small open economy with a floating exchange rate and in a large open economy with a floating exchange rate on: a. domestic investment b. domestic output

In the IS curve, why does an increase in the net exchange rate lower the net exports?

In a short-run model of a large open economy, after net capital outflow is substituted for net exports in the IS curve:

According to the Mundell-Fleming model, under floating exchange rates a fiscal expansion:

What is the main difference between the IS-LM model and the Mundell-Fleming model? Under which standard have the world's major economies in late-nineteenth and early-twentieth centuries operated?

Between 1995 and 2005, China chose to: