文档介绍：CHAPTER TWELVE
Aggregate Demand in the
Open12 Economy
When conducting ary and fiscal policy, policymakers often look be-
yond their own country’s borders. Even if domestic prosperity is their sole ob-
jective, it is necessary for them to consider the rest of the world. The
international flow of goods and services and the international flow of capital
can affect an economy in profound ways. Policymakers ignore these effects at
their peril.
In this chapter we extend our analysis of aggregate demand to include inter-
national trade and finance. The model developed in this chapter, called the
Mundell–Fleming model, is an open-economy version of the IS–LM model.
Both models stress the interaction between the goods market and the money
market. Both models assume that the price level is fixed and then show what
causes short-run fluctuations in aggregate e (or, equivalently, shifts in the
aggregate demand curve).The key difference is that the IS–LM model assumes a
closed economy, whereas the Mundell–Fleming model assumes an open econ-
Mundell–Fleming model extends the short-run model of national in-
come from Chapters 10 and 11 by including the effects of international trade
and finance from Chapter 5.
The Mundell–Fleming model makes one important and extreme assump-
tion: it assumes that the economy being studied is a small open economy with
perfect capital is, the economy can borrow or lend as much as it
wants in world financial markets and, as a result, the economy’s interest rate is
determined by the world interest rate. One virtue of this assumption is that it
simplifies the analysis: once the interest rate is determined, we can concentrate
our attention on the role of the exchange rate. In addition, for some
economies, such as Belgium or herlands, the assumption of a small
open economy with perfect capital mobility is a good this assump-
tion—and thus the Mundell–Fleming model—does no