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 corresponds to which of the following special cases?
A) classical open economy
B) IS-LM model
C) Mundell-Fleming with floating exchange rate
D) Mundell-Fleming with fixed exchange rate

Question

Quizplus · Accepted Answer

The Mundell-Fleming model with a fixed exchange rate assumes a horizontal short-run aggregate supply curve, infinitely elastic international capital flows, and a fixed nominal exchange rate, matching the conditions given.

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