Consider a small open economy with perfect capital mobility that exports a commodity whose price is subject to volatile fluctuations. If the citizens of the country value stability in the gross domestic product, then the central bank should adopt a _____ exchange rate regime.floatingnominalpegged fixedfixed

Consider a small open economy that is operating under a floating-exchange-rate regime with perfect capital mobility. In this economy, an increase in government spending would cause the equilibrium income to:decrease and the exchange rate to increase.increase and the exchange rate to decrease.increase and the exchange rate to remain unchanged.remain unchanged and the exchange rate to increase.

Suppose that in a small open economy with perfect capital mobility and a floating exchange rate, the central bank increases the money supply because the economy is in a recession. This will cause the equilibrium income to _____ and the equilibrium exchange rate to _____.decrease; risedecrease; fallincrease; fallincrease; rise

If a country adopts a fixed-exchange-rate regime, then it is _____ for monetary policymakers to stabilize employment or prices than if it had a floating-exchange-rate regime.easiermore difficultneither easier nor more difficultimpossible

The central bank of a small open economy with perfect capital mobility and a fixed exchange rate can increase equilibrium income by:devaluing the currency.shifting the LM* curve to the left.allowing the currency to float while retaining a fixed exchange rate.revaluing of the currency.

Considering the Mundell-Fleming model, suppose a small open country is using a floating exchange rate system.If the government implements tight monetary policy,the interest rate will__, the foreign capital will__.