Two Small Open Economies, Fixed and Flex, Can Be Described

question 54

Essay

Two small open economies, Fixed and Flex, can be described by the Mundell-Fleming model. The countries are otherwise identical except that Fixed maintains a fixed exchange rate, while Flex maintains a flexible exchange-rate regime. The governments of both countries increase spending by the same amount. Compare what happens in the two countries to: a. the exchange rate
b. equilibrium output
c. net exports.

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Definitions:

Standard Error

Standard error is a statistical measure that estimates the accuracy with which a sample distribution represents a population by using standard deviation.

Population Standard Deviation

Population Standard Deviation is a measure of the dispersion or spread of all the values in a given population, indicating how much the individual values in the population differ from the population mean.

Sample Size

The number of observations or data points collected in a sample, which impacts the precision of statistical results.

Standard Error

A measure of the accuracy of a sample mean by describing the dispersion of sample means around the population mean.