If the short-run aggregate supply curve is assumed to be horizontal, international capital flows are infinitely elastic, and the nominal exchange rate is fixed, then the big, comprehensive model in the appendix to Chapter 14 corresponds to which of the following special cases?
A)classical open economy
B)IS-LM model
C)Mundell-Fleming model with floating exchange rate
D)Mundell-Fleming model with fixed exchange rate

Question

Quizplus · Accepted Answer

The conditions described match the Mundell-Fleming model with a fixed exchange rate, where the short-run aggregate supply is horizontal, and capital flows are perfectly elastic.

If the Short-Run Aggregate Supply Curve Is Assumed to Be