The article examines how monetary and fiscal policies affect an open economy with a flexible exchange rate. The model used in the study looks at the impact of these policies over a medium-term period, focusing on the balance between goods and asset markets. The findings suggest that the domestic price level adjusts endogenously to achieve purchasing power parity, unlike in traditional Keynesian models where prices are fixed. This adjustment influences real income in both the short-run and in equilibrium, highlighting the importance of capital mobility and market integration in determining economic outcomes.