The figure below shows an IS-LM-FE model for an economy with fixed exchange rates. Initially the economy was at Point A, a triple intersection. Here, the FE curve is flatter than the LM curve.
At Point B, the economy is experiencing
A. a decreasing money supply.
B. a high rate of unemployment.
C. a surplus in the overall balance of payments.
D. an overall balance of payments that is in equilibrium.
Answer: C
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Indicate whether the statement is true or false
Legislators who must stand for re-election every two years will tend to support
A) policies beneficial to all the people eligible to vote. B) policies beneficial to all the people now living. C) policies beneficial to all present voters and future generations of voters. D) policies promising early benefits and deferred costs. E) policies representing the public interest.
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A) the law of one price will hold. B) deviations from PPP will occur. C) PPP will hold. D) Both A and C.
The OLS residuals
A) can be calculated using the errors from the regression function. B) can be calculated by subtracting the fitted values from the actual values. C) are unknown since we do not know the population regression function. D) should not be used in practice since they indicate that your regression does not run through all your observations.