The Robert Mundell and Marcus Fleming developed the Mundell-Fleming model to analyse the working of an open economy under different exchange rate regimes. The model is an extension of the IS-LM framework and incorporates international capital mobility, making it highly relevant for understanding macroeconomic policy in a globalised economy. One of the most important conclusions of the model is the effectiveness of monetary and fiscal policy depends largely on the exchange rate system and the degree of capital mobility. Under a fixed exchange rate system with high capital mobility, monetary policy becomes ineffective in influencing output and employment. If the central bank tries to expand money supply, interest rates fall, leading to capital outflow. This creates downward pressure on the domestic currency, and the central bank must intervene by selling foreign reserves to maintain the fixed exchange rate. As a result, the initial expansion in money supply gets neutralised. On the other hand, fiscal policy is highly effective under fixed exchange rates because government spending raises income and interest rates, attracting capital inflow and supporting the exchange rate. In a