Indicate whether the following statement is true, false, or uncertain and explain your answer using words, graphs and equations as appropriate. (a) In the Mundell–Fleming model with a floating exchange rate, a rise in the world interest rate will lead to both income and net exports rising. (i) (ii) In a small open economy with a fixed exchange rate, an effective policy to increase equilibrium output is to increase the money supply. (iii) Imposing a tariff on imports will cause output to increase.

Indicate whether the following statement is true, false, or uncertain and explain your answer using words, graphs and equations as appropriate. (a) In the Mundell–Fleming model with a floating exchange rate, a rise in the world interest rate will lead to both income and net exports rising. (i) (ii) In a small open economy with a fixed exchange rate, an effective policy to increase equilibrium output is to increase the money supply. (iii) Imposing a tariff on imports will cause output to increase.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Economics
(a)
Indicate whether the following statement is true, false, or
uncertain and explain your answer using words, graphs and
equations as appropriate.
In the Mundell–Fleming model with a floating exchange
rate, a rise in the world interest rate will lead to both
income and net exports rising.
(i)
(ii)
In a small open economy with a fixed exchange rate, an
effective policy to increase equilibrium output is to
increase the money supply.
(iii) Imposing a tariff on imports will cause output to
increase.

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