The Mundell-Fleming model is a model relating to appropriate use of monetary and fiscal policy in an open economy under fixed exchange rates with capital mobility. Under floating exchange rate there is limited scope for government intervention to achieve internal and external balance. The model differentiates the effect of monetary and fiscal policy on the open economy. The separation of [...]
Get the answer of: What is Aggregate Demand? National output or GNP as also the general price level are determined by the interplay of aggregate demand and aggregate supply. This means that the total production of a country is determined partly by aggregate demand and partly by aggregate supply. Aggregate demand refers to the quantity of goods and services that [...]
The below mentioned article provides short notes on the Effect of Shift in Aggregate Demand. We may now examine the effects of a shift in aggregate demand curve due to any change in government policy such as an unexpected increase in the money supply by the central bank. In the short run as the economy moves from point E to [...]