Economics · Macroeconomics
In the Mundell-Fleming model under a flexible exchange rate and absolute capital mobility, what would happen to the domestic rate of interest in the new equilibrium if the money supply rises, assuming the international interest rate remains unchanged?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It would remain constant.✓
- 2It would either rise or fall.
- 3It will fall.
- 4It will rise.
Correct answer
It would remain constant.
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