If price expectations are assumed to be correct, money demand is proportional to income, and net capital flow is infinitely elastic, then the big, comprehensive model in the appendix to Chapter 14 corresponds to which of the following special cases?
A)classical closed economy
B)classical open economy
C)IS-LM model
D)Mundell-Fleming model with floating exchange rate

Question

Quizplus · Accepted Answer

In a classical open economy, price expectations are correct, money demand is proportional to income, and net capital flow is infinitely elastic, aligning with the conditions given.

If Price Expectations Are Assumed to Be Correct, Money Demand