Discuss each of the following: (10 Marks)

a. How effective is monetary and fiscal policy in increasing GDP in an open economy under a fixed exchange rate regime with constant prices? (4 marks)

b. How effective is monetary and fiscal policy in increasing GDP in an open economy under a flexible exchange rate regime with constant prices? (4 marks)

c. How are your answers to parts a. and b. impacted upon by the extent of capital mobility? (2 Marks)