Illustrate with a graph the effects of fiscal policy when exchange rates are fixed
What will be an ideal response?
Draw horizontal BP curve. Fiscal policy shifts IS. Monetary policy must accommodate by shifting LM to match IS in order to maintain fixed exchange rate.
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The price elasticity of demand ________ in value when moving downward along a ________ line demand curve
A) falls; straight B) rises; curved C) falls, curved D) rises; straight
When government debt is financed internally, future generations will
a. inherit a higher tax liability without additional interest income. b. inherit neither higher taxes nor additional interest income. c. inherit both higher taxes and additional interest income. d. receive lower interest income and a lower tax liability.
An increase in aggregate demand will cause:
a. real domestic output to fall and have no effect on the price level b. The price level to increase and real domestic output to rise c. The price level to drop and have no effect on real domestic output d. Both real output and the price level to fall
For a perfectly competitive firm
A. marginal revenue will graph as an upwardly sloping line. B. the demand curve will lie above the marginal revenue curve. C. the marginal revenue curve will lie above the demand curve. D. the demand and marginal revenue curves are identical.