In the Mundell-Fleming model，Suppose the risk premium (θ) rises due to an increased risk associated with investing or lending to the domestic country.  which answer of the effects of a change in the risk premium is right. （Assume that whatever happens in a small open economy does not affect world financial markets.）A.IS* curve shifts to leftLM* curve shifts to rightB.IS* curve shifts to leftLM* curve shifts to leftC.IS* curve shifts to rightLM* curve shifts to leftD.IS* curve shifts to rightLM* curve shifts to right

In the Mundell–Fleming model with floating exchange rates, an increase in a country's risk premium will cause income to _____ and the exchange rate to _____.fall; risefall; fallrise; riserise; fall

Select the statement which incorrectly explain the behavior of the economic impact under Mundell-Fleming Model.A.1.      In a small open economy with fixed exchange rate, IS* and LM* curves will shift to right under expansionary fiscal policy and output is increased.B.1.      In a small open economy with fixed exchange rate, monetary policy is ineffective while fiscal policy is effective.C.1.      In a small open economy with floating exchange rate, monetary policy is effective while fiscal policy is ineffective.D.1.      In a small open economy with floating exchange rate, IS* curve will shift to right under expansionary fiscal policy and output is increased.

Under Fixed Exchange Rates, suppose the government imposes restrictions on imports, under Mundell-Fleming Model, which option is not correct?A.IS* curve shifts to the rightB.IS curve cannot shift because it's under fixed exchange rateC.Y increases at the endD.the money supply increases

The Mundell–Fleming model predicts that, ine–Y space, an appreciation of the exchange rate will cause the LM* curve to:shift to the left.shift to the right.remain unchanged.become steeper.

Which of the following statements about the Mundell-Fleming model is incorrect？A.Under a floating exchange rate regime, capital is fully mobile and expansionary fiscal spending reduces the country's net exports by an equivalent amount.B.If price level changes are allowed, the AD-AS model should be used to analyse the effectiveness of fiscal and monetary policies.C.Under a fixed exchange rate regime, capital is completely immobile and expansionary monetary policy leads to a drain on foreign exchange reserves.D.Under a fixed exchange rate regime, an expansion of fiscal policy leads to an increase in the money supply.