Question 2.Australia is a small open economy with a flexible (floating) exchange rate system. Use theMundell-Fleming model (i.e. the open-economy IS-LM-IP model) to analyse what willhappen to income, the exchange rate, and the trade balance (net exports) in response to thefollowing shocks. Carefully explain the adjustment process in each case.a) A significant fall in the foreign demand for Australian minerals export.b) The Abbott government implements a fiscal expansion program, other things heldconstant, and the Reserve Bank of Australia keeps the interest rate fixed.
A small open economy
Plagiarism-free and delivered on time!
We are passionate about delivering quality essays.
Our writers know how to write on any topic and subject area while meeting all of your specific requirements.
Unlike most other services, we will do a free revision if you need us to make corrections even after delivery.
How it Works
Place an order
Fill out the order form.
Attach any custom instructions that is required to complete your order.
Pay online safely.
The order form will redirect you to a payment page.
Receive Order via Email
Once the order is complete, we’ll send it via the email provided on the order form.