Problem
1. How does the existence of a flexible exchange rate affect the impact of monetary policy shifts on a domestic economy? Explain, and illustrate for a tightening of monetary policy using the IS/LM/BP graph.
2. What effect does the adoption of a flexible exchange rate have on the impacts of fiscal policy shifts in a country whose capital markets are closely integrated with those of the rest of the world? Use the IS/LM/BP graph to illustrate for a fiscal tightening.
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.