Question
In the Mundell-Fleming model with perfect capital mobility, the domestic interest rate is equal to the world interest rate: r = r* . Explain why
In the Mundell-Fleming model with perfect capital mobility, the domestic interest rate is equal to the world interest rate: r = r* . Explain why this assumption is reasonable. What will lenders do if r > r* , and how will this affect the exchange rate?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Economics Today The Macro View
Authors: Roger LeRoy Miller
18th Edition
0133884872, 978-0133884876
