The Mundell-Fleming model takes the world interest rate 7″~ as an exogenous variable. Let’sconsider what happens when this variable changes.a. What might cause the world interest rate to rise?b. In the Mundell-Fleming model with a floating exchange rate, what happens to aggregateincome, the exchange rate, and the trade balance when the world interest rate rises?c. In the Mundell-Fleming model with a fixed exchange rate, what happens to aggregateincome, the exchange rate, and the trade balance when the world interest rate rises?
