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The Mundell-Flaming model assumes a flat aggregate supply curve, no PPP, imperfect capital mobility, and static expectations. With floating exchange rates, equilibrium requires domestic and currency markets to clear. Monetary expansion causes depreciation and lower rates, while fiscal expansion has the opposite effects. With fixed rates, monetary expansion reduces reserves long-run, and fiscal expansion raises income and rates with short-run reserve gains. It differs from monetary models by emphasizing acti

Author

Dương Quốc Tuấn

Language

EN