Consider the IS-LM curves for an economy with flexible exchange rates. An increase in the foreign income will result in the:
A) LM curve shifting to the right.
B) IS curve shifting to the right.
C) LM curve shifting to the left.
D) IS curve shifting to the left.
Ans: B) IS curve shifting to the right.
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Refer to the scenario above. If India wants to repay a lower sum of money to the U.S., it should:
A) peg the exchange rate below 50 rupees per dollar. B) peg the exchange rate to 60 rupees per dollar. C) continue to use a flexible exchange rate regime. D) peg the exchange rate to 70 rupees per dollar.
The systemic costs and burdens that inflation imposes upon a society are almost entirely the result of
A) government price controls. B) inability to predict its rate and timing. C) the fact that no one can ultimately gain from higher prices because everyone is a consumer. D) the lag between the rise of wage costs and the subsequent rise of prices. E) the lag between the rise of prices and the subsequent rise of wages.