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Two small open economies, Fixed and Flex, can be described by the Mundell-Fleming model. The countries are otherwise identical except that Fixed maintains a fixed
Two small open economies, Fixed and Flex, can be described by the Mundell-Fleming model. The countries are otherwise identical except that Fixed maintains a fixed exchange rate, while Flex maintains a flexible exchange rate regime. The central banks of both countries increase the money supply by the same amount. Compare what happens in the two countries to: A. The exchange rate B. Equilibrium output C. Net exports
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