4. Use the Mundell-Fleming model to predict what would happen to real GDP, the exchange rate, and net exports under both floating and fixed exchange rate regimes in response to each of the following shocks. Your answers should be in the form of fully-labeled graphs, where any curve shifts and new equilibrium are clearly shown. (a) Consumer confidence in the economy is falling, so consumers start to spend less. (b) Toyota designed a line of stylish new cars, making consumers prefer foreign cars over domestic cars. (c) Banks double the number of ATMs (automatic teller machines) around the economy, reducing the demand for money.

4. Use the Mundell-Fleming model to predict what would happen to real GDP, the exchange rate, and net exports under both floating and fixed exchange rate regimes in response to each of the following shocks. Your answers should be in the form of fully-labeled graphs, where any curve shifts and new equilibrium are clearly shown. (a) Consumer confidence in the economy is falling, so consumers start to spend less. (b) Toyota designed a line of stylish new cars, making consumers prefer foreign cars over domestic cars. (c) Banks double the number of ATMs (automatic teller machines) around the economy, reducing the demand for money.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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