Questions:

Assume we start with internal-external balance in the IS-LM-BP. Briefly explain each curve and what internal-external balance means and draw the diagram (You can choose any degree of capital mobility).

Assume we have perfect capital mobility. The monetary authority conducts a monetary expansion. Clearly discuss what happens to investment, the current account and the capital and financial account in the final equilibrium. Show your results with a diagram.

Now assume we have imperfect capital mobility. Clearly discuss why, in the final equilibrium the interest rate must be below the initial interest rate. What happens to Investment, the current account and the capital and financial account? Show your results with a diagram.