The Mundell-Fleming model assumes that capital flows are:  A. Perfectly mobile  B. Completely restricted  C. Influenced by interest rate differentials  D. Independent of exchange rate fluctuations

Which of the following statements about the Mundell-Fleming model is incorrect？A.Under a floating exchange rate regime, capital is fully mobile and expansionary fiscal spending reduces the country's net exports by an equivalent amount.B.If price level changes are allowed, the AD-AS model should be used to analyse the effectiveness of fiscal and monetary policies.C.Under a fixed exchange rate regime, capital is completely immobile and expansionary monetary policy leads to a drain on foreign exchange reserves.D.Under a fixed exchange rate regime, an expansion of fiscal policy leads to an increase in the money supply.

Considering the Mundell-Fleming model, suppose a small open country is using a floating exchange rate system.If the government implements tight monetary policy,the interest rate will__, the foreign capital will__.

In the Mundell-Fleming Model for a small open economy with perfect capital mobility and a fixed exchange rate regime, if there is an increase in government spending, what immediate effect is expected on the country's foreign exchange reserves?A.A. The foreign exchange reserves will increase.B.The foreign exchange reserves will decrease.C.The foreign exchange reserves will remain unchanged.D.The impact on the foreign exchange reserves is unpredictable.

Select the statement which incorrectly explain the behavior of the economic impact under Mundell-Fleming Model.A.1.      In a small open economy with fixed exchange rate, IS* and LM* curves will shift to right under expansionary fiscal policy and output is increased.B.1.      In a small open economy with fixed exchange rate, monetary policy is ineffective while fiscal policy is effective.C.1.      In a small open economy with floating exchange rate, monetary policy is effective while fiscal policy is ineffective.D.1.      In a small open economy with floating exchange rate, IS* curve will shift to right under expansionary fiscal policy and output is increased.

The Mundell–Fleming model predicts that, ine–Y space, an appreciation of the exchange rate will cause the LM* curve to:shift to the left.shift to the right.remain unchanged.become steeper.