11.k Mundell Fleming and capital mobility
High Capital Mobility
Expansionary monetary policy and expansionary fiscal policy are likely to have opposite effects on exchange rates. Expansionary monetary policy will reduce the interest rate and, consequently, reduce the inflow of capital investment in physical and financial assets.
If interest rates go down, then it becomes cheaper to borrow money, which encourages more investing. Why would the book state that inflow of capital investment is reduced?
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