Question
Use the Mundell-Fleming model (AND PROVIDE GRAPHS) to predict what would happen to aggregate income, the exchange rate, and the trade balance under both floating
Use the Mundell-Fleming model (AND PROVIDE GRAPHS) to predict what would happen to aggregate income, the exchange rate, and the trade balance under both floating and fixed exchange rates in response to each of the following shocks. Include an appropriate graph in your answer. a. Baby boomers retire and no longer need to save for retirement. They decrease national savings and increase consumption. b. The Volkswagen emissions scandal makes many consumers prefer domestic cars over foreign cars. c. Banks start charging you $3 every time you take money out of their ATM machines.
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