1. Explain under which conditions the following statement is true: “The central bank can
control either the exchange rate or the money supply, but not both.”
2. Explain precisely how the exchange rate affects the curves in the graphic Mundell-
Fleming model. As an illustration, explain how an appreciation of the currency affects the
economy’s equilibrium level of GDP.
3. In the early 1980s, United States macroeconomic policy combined a tight monetary policy
to combat lingering inflation and very expansionary fiscal policy resulting from a sharp
reductions in taxes. Use the Mundell-Fleming model to illustrate the effects of this
combination of policies on the exchange rate.
It is my assignment, since my undergraduate is not economics, so I do not know how to answer the questions. Could you help me to figure them out? Thank you very much!
[此贴子已经被作者于2009-2-22 10:54:58编辑过]