Chapter 6 - The Open Economy Question: Case Study given in past midterm exam for Large Open Economy Large Open Economy: Political instability in Mexico in 1994.Discuss and explain what happens with words (abbreviations and arrows are fine) and with graphs (market for loanable funds and market for foreign currency) Case 1: what happens to NFI, r, NX and real exchange rate in the US. Case 2: what happens to NFI, r, NX and real exchange rate in Mexico Chapter 13 - Open Economy in the SR Questions for Review: 1, 2, 3 1. In the Mundell-Fleming model with floating exchange rates, explain what happens to aggregate income, the exchange rate, and the trade balance when taxes are raised. 2. In the Mundell-Fleming model with floating exchange rates, explain what happens to aggregate income, the exchange rate, and the trade balance when the money supply is reduced. 3. In the Mundell-Fleming model with floating exchange rates, explain what happens to aggregate income, the exchange rate, and the trade balance when a quota on imported cars is removed