Weve now built our basic model for an open economy in the


We've now built our basic model for an open economy in the Medium Run, the Mundell-Fleming model. The best way to understand it is to build it yourself. Hence your task here is to build a Powerpoint slide - a single slide is enough, and the maximum - showing the IS-LM / AD-AS / IP model. Assume now a contractionary Monetary Policy.

Use animation of the curves, showing shifts in the curves in the correct sequence and explained by textboxes, to show the effect of this Monetary Policy in the Short Run and the Medium Run. The Lecture Video provides an exact template of the basic model - at its simplest, your Powerpoint slide could closely imitate the contractionary MP slide in the lecture. However note that the Lecture Video simplifies the process greatly - as with any model, it is an abstraction from reality. Your Powerpoint therefore can aim for greater complexity and therefore greater reality. Keep in mind that the exchange rate will ‘overshoot', and then return back towards the original level.

Does the Lecture Video slide directly show this? (It does not, as part of the process of abstraction). So as you see in your own Powerpoint the exchange rate or other variables changing, consider carefully the effect this will have on the curves in other quadrants, and as much as possible, show this in your animated slide.

As a result of this you will certainly see more Aggregate Demand curves than the three seen in the Lecture Video, and you can show these extra curves in your own slide. (But again, if your slide resembles the Lecture Video slide, you will have completed the exercise to the basic level required)

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