During the last four decades an increasingly important role has been assigned to the study of macroeconomic adjustments in open economies. Partly, this reflects the fact that economies are being increasingly more interdependent and need to be coordinated at the international level. The openness of trade and the increasing mobility of capital internationally are primarily responsible for macroeconomic interdependence. In the early 1930s economists sought to apply price theory to explain the aggregate exports and imports and they viewed the exchange rate as the relative price of commodities traded internationally. However, because of the advent of the development of national accounts they started to treat the trade balance as a component of the national account, not only domestic account. They applied the Keynes’s writings to explain the balance of payment, which became an integral part of the theory that explains the dynamics of adjustments in the stock of money and overall trade balance. This approach uses IS-LM-BP framework to explain the changes that will occur in an economy as an effect of using monetary or fiscal policy, and how those changes will differ when the country operates under different capital mobilities and under floating or fixed exchange rates. One of the three components of this model, the IS curve, shows all of the possible combinations of income and the interest rates in the goods market. The LM curve relates to the interest rates and output on the money market. The BP curve is a line drawn on an IS-LM curve, which shows the different combinations of real income and interest rates at which the balance of payments is in equilibrium. The slope of the BP line indicates the degree of capital mobility in a country in a way that- the flatter the BP curve, the greater the capital mobility. The aim of this essay is to use this model in order to