According to the Mundell-Fleming model for a small open economy with flexible exchange rates, if the Bank of Canada cannot alter domestic interest rates, changes in the money supply could still influence aggregate income through changes in the:
A)exchange rate.
B)price level.
C)level of government spending.
D)tax rates.

Question

Quizplus · Accepted Answer

In a small open economy with flexible exchange rates, changes in the money supply affect the exchange rate, which in turn influences net exports and aggregate income.

According to the Mundell-Fleming Model for a Small Open Economy