Problem
1. In the model in this chapter, what are the effects on the domestic economy of an increase in the world real interest rate under a flexible exchange rate and under a fixed exchange rate?
2. In the model, is money neutral under a flexible exchange rate? Explain why or why not. Can we say that money is neutral under a fixed exchange rate? Explain.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.