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Using the Mundell-Fleming Diagram Dealing with Internal Balance (IB) and External

question 9

Essay

Using the Mundell-Fleming diagram dealing with internal balance (IB) and external balance (EB), explain what is meant by effective policy instrument choice, being careful to identify clearly the critical elements of the diagram. Why is the EB curve postulated to be more interest-elastic than the IB curve? In what ways is the IS/LM/BP model preferable to the simple Mundell-Fleming diagram?


Definitions:

Amygdala

A structure within the temporal lobe of the brain that is involved in the processing of emotions such as fear, anger, and pleasure.

Medulla

An essential part of the brainstem involved in autonomic functions such as heart rate and breathing.

Cerebellum

A region of the brain that plays an important role in motor control, coordination, and balance.

Pons

A part of the brain located in the brainstem, playing crucial roles in regulating breathing, communication between different parts of the brain, and sensations such as hearing, taste, and balance.

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