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Mundell-Fleming model is a very common model in macroeconomics. It is the extension of IS-LM model. In IS-LM model it has been dealt with a closed economy, whereas in Mundell-Fleming model it is dealt with a small open economy. It is also known as the IS-LM-BoP Model. It helps to show the short-run relations between interest rate, output and nominal exchange rate. Study of this model also involves the study of the effect of IS-LM-BoP graph due to the flexible exchange rate regime and fixed exchange rate regime. It also includes the study of its differences from Mundell-Fleming Model.
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