Draw a Mundell-Fleming model labelling all curves and axis. Make sure you include the full employment level of output and the world interest rate. Why does the IS curve slope down and why does the LM curve slope up? (use intuition or maths)
Hi can you please help with explanations and calculations?
1. Draw a Mundell-Fleming model labelling all curves and axis. Make sure you include the full employment level of output and the world interest rate. Why does the IS curve slope down and why does the LM curve slope up? (use intuition or maths)
2. For a monetary expansion under a floating rate (ignoring the effects of the output gap on prices for now), explain carefully why the LM curve shifts right, and then the IS curve shifts right
3. What is the output gap and why is it important for
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 2 images
