A Country's exports have declined by 30% because of the pandemic disease we are going through in 2020.

Show and analyze the effects of this decline in exports of The Country on :

- domestic economy (income and interest rate);

- balance of payments; and

- exchange rate

within the Mundell-Fleming Model under :

1. Fixed Exchange Rate Regime and for the Imperfect and Perfect Capital Mobility situations ;

2. Flexible Exchange Rate Regime and for the Imperfect and Perfect Capital Mobility situations.

-Draw diagrams for different exchange rate regimes and capital mobility situations.

-Assume that interest elasticity of international capital is higher than interest elasticity of domestic money demand .

-Compare the resultsand write brief comments on them.

-Is the effect on income larger under fixed or flexible exchange rates? Why ?