Question: Within the Mundell-Fleming model assuming perfect capital mobility, analyze the effects of a positive shock to money demand (i.e., an increase in the demand for

Within the Mundell-Fleming model assuming perfect capital mobility, analyze the effects of a positive shock to money demand (i.e., an increase in the demand for money for given levels of income and the interest rate). Consider the effect of the shock on income when the exchange rate is fixed and when it is flexible.

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