The figure below shows an IS-LM-FE model for an economy with fixed exchange rates. Initially the economy is at Point A, a triple intersection. Here, the FE curve is steeper than the LM curve.
At Point B, the economy is experiencing
A. an overall balance of payments that is in equilibrium.
B. a surplus in the overall balance of payments.
C. an expanding money supply.
D. a deficit in the overall balance of payments.
Answer: D
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In the long-run ISLM model and with everything else held constant, as long as the level of output ________ the natural rate level, the price level will continue to ________, shifting the LM curve to the ________, until finally output is back at the
natural rate level. A) exceeds; rise; right B) exceeds; rise; left C) remains below; fall; left D) remains below; rise; right
In 1994, the state of California suffered a devastating earthquake. To help pay for the damages, the state raised its sales tax by one cent per dollar of expenditure on most consumer goods
This state sales tax is an example of what economists call: A) an ad valorem tax. B) a specific tax. C) a neutral tax. D) a negative tax. E) none of the above
Those goods having a calculated income elasticity that is negative are called:
a. producers' goods b. durable goods c. inferior goods d. nondurable goods e. none of the above
The Toys-R-Danger-Us Toy Company can produce 500 water pistols for a total cost of $1,400 . If the variable cost of producing 500 water pistols is $1,300, then
a. fixed cost must be $100 b. marginal cost must be $1,300 c. marginal cost must be increasing d. average variable cost must be decreasing e. average fixed cost must be constant