Use the Mundell–Fleming model to answer the following questions about the province of Alberta (a small open economy).
a. What kind of exchange-rate system does Alberta have with its major trading partners (the provinces of British Columbia and Ontario)?
b. If Alberta suffers from a recession, should the provincial government use monetary or fiscal policy to stimulate employment? Explain.
c. If Alberta prohibited the import of wines from the province of Ontario, what would happen to income, the exchange rate, and the trade balance? Consider both the short-run and the long-run impacts.