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Money supply Essay Topics & Paper Examples

Mundell Fleming Model

In this essay I will be discussing the way in which free capital flows can cause constraints on monetary policies. I will be looking at the balance of payments and how when it is applied to the Keynesian IS/LM model produces the Mundell – Fleming model. The Mundell – Fleming model shows the relationship between exchange rates and national income. Additionally, to further investigate this situation I will be looking into the ways in which monetary policies behave according to various exchange rate schemes, namely fixed and floating exchange rates. The balance of payments consists of the current account and the capital account. In theory, these two accounts should balance. The current account concerns the imports and exports of goods…