Mundell Fleming Model (1) : Kurva IS dan LM untuk Perekonomian Terbuka

Summary

The video script delves into the Mando Fleming model, focusing on the revised IS-LM curves within an open economy context. It explains the concept of a small open economy, where the domestic interest rate aligns with the international rate due to perfect capital mobility. The script explores the relationship between the nominal and real exchange rates, the impact of exchange rate movements on net exports, and how these factors influence the IS curve. It also discusses the LM curve's vertical representation in an open economy, leading to the determination of equilibrium exchange rates and income levels.

Takeaways

• 🌐 The video discusses the Mando Fleming model in the context of an open economy, focusing on revised IS and LM curves.
• 💼 An open economy is characterized by international trade in goods and services, and capital transfers between countries.
• 💡 The net capital outflow is equivalent to the trade balance, which is the difference between national savings and investment.
• 🔍 In an open economy, the IS-LM model needs to be revised to include international trade and capital flows.
• 🌐 The concept of a small open economy is introduced, where the country does not influence the international interest rate, and domestic rates are determined by international rates adjusted for risk premium.
• 💰 The distinction between nominal and real exchange rates is explained, with the real exchange rate being the relative price of goods between two countries.
• 📈 The relationship between the real exchange rate and net exports is negative, meaning a lower real exchange rate leads to higher net exports.
• 📊 The revised IS curve in the Mando Fleming model shows the balance in the goods and services market, with net exports being a function of the real exchange rate.
• 🏦 The LM curve in the Mando Fleming model is vertical, indicating that the interest rate is determined by the international rate, reflecting the assumption of perfect capital mobility.
• 🔗 The equilibrium in the Mando Fleming model is found at the intersection of the revised IS and LM curves, representing the balance between the goods and money markets in an open economy.

Q & A

What is the main topic of the video script?

The main topic of the video script is the discussion of the Mando Fleming model, specifically focusing on the revised IS and LM curves in the context of an open economy.

What is an open economy according to the script?

An open economy is one where a country engages in export and import activities of goods and services, as well as the transfer of money or capital to and from other countries.

What is the relationship between net capital outflow and the trade balance in an open economy?

In an open economy, the net capital outflow is equal to the trade balance, which is the difference between national saving (S) and investment (I).

What is the significance of the small open economy assumption in the Mando Fleming model?

The small open economy assumption implies that the country does not have the power to influence the international interest rate, meaning domestic interest rates are determined by international rates.

What are the two types of exchange rates discussed in the script?

The two types of exchange rates discussed are the nominal exchange rate, which is the relative price of one currency for another, and the real exchange rate, which represents the relative price of goods between two countries.

How is the real exchange rate related to the nominal exchange rate?

The real exchange rate (epsilon) is calculated as the nominal exchange rate multiplied by the domestic price level divided by the foreign price level.

What is the relationship between the real exchange rate and net exports?

There is a negative relationship between the real exchange rate and net exports. A lower real exchange rate means domestic goods are relatively cheaper, leading to higher exports and thus a higher net export.

How does the revised IS curve in the Mando Fleming model differ from the traditional IS curve?

In the Mando Fleming model, the revised IS curve (IS*) represents the equilibrium in the goods market with an open economy, where the relationship is between the nominal exchange rate and income or output, rather than the interest rate and income or output as in the traditional IS curve.

What does the LM curve represent in the context of the Mando Fleming model?

In the Mando Fleming model, the LM curve represents the equilibrium in the money market of an open economy, with the assumption that the domestic interest rate is equal to the international interest rate.

What is the significance of the intersection of the revised IS and LM curves in the Mando Fleming model?

The intersection of the revised IS and LM curves represents the equilibrium exchange rate and the equilibrium level of income in an open economy, taking into account both the balance in the goods market and the money market.