2. Over the past several decades, investors around the world have become more willing to take advantage of opportunities in other countries.

Because of this increasing sophistication, economies are more open today than in the past. Consider how this development affects the ability of monetary policy to influence the economy.

a. If investors become more willing to substitute foreign and domestic assets, what happens to the slope of the CF function?

b. If the CF function changes in this way, what happens to the slope of the IS curve?
c.How does this change in the IS curve affect the Fed’s ability to control the interest rate?

d. How does this change in the IS curve affect the Fed’s ability to control national income?