>> Business Economics
Small Open Economy with a Fixed Exchange Rate
a) Suppose the economy of Neutrino has reached its long run equilibrium (i.e. full employment). Use the Mundell-Fleming model to explain what would happen to aggregate income, the real exchange rate. the nominal exchange rate, the real interest rate in this small open economy with a fixed exchange rate if there is an increase in investment demand (i.e. the investment demand shifts up).