“1636 Words” The figure 1 is the basic diagram of the IS-LM Mundell-Fleming model. {draw:frame} IS relation as stated by Olivier Blanchard (2000), “a higher interest rate leads to a decrease in investment, so a decrease in the demand for domestic goods and a decrease in output”. Therefore the LM relation would be an increase in output will tend to an increase in the demand for money, and therefore an increase in the equilibrium interest rate. {draw:frame} {draw:frame} In the matter of the part B of the assignment “if the government prefers depreciation of the exchange rate, how should it finance the increase in government expenditure” The three economic policy could be implemented; firstly the Fiscal policy by rising taxes, secondly monetary policy by increasing money supply and finally trade policy by cutting quotas or tariffs on the imports. {draw:frame} {draw:frame} {draw:frame} Conclusion, as we can see on the figure 4 to 6 the three policies could be......

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Title: Economic Policy
Approximate Word Count: 325
Approximate Pages: 2 (250 words per double-spaced page)

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