Assume a nation is of unemployment and external balance, given a fixed exchange rate, an expansionary fiscal policy alone will cause:
A. achieving its internal objective only
B. arriving at the external balance only
C. reaching internal balance and external balance
D. nothing
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Which of the following is not true with the factors affecting the position of IS, LM and BP schedule?
A. If there is an increase in any of the three items, the IS schedule will shift to the left.
B. If the domestic money supply increases, then the LM schedule will shift to the right.
C. Depreciation will cause a rightward shift of the BP schedule (Marshall-Lerner condition holds)
D. A fall in savings or imports will require a rightward shift of the IS schedule
The IS and LM schedules intersect at a point on the BP schedule, which implies:
A) Increase in the money supply
B. Decrease in government expenditures
C. Increase in business and household taxes
Decrease in import tariffs
When capital is perfectly mobile, the BP schedule is:
A. a horizontal line
B. a vertical line
C. an upward-sloping line
D. an downward-sloping line
The BP schedule is an upward-sloping line, because higher levels of income worsen the current account:
A. improve
B. worsen
C. improve or worsen
D. none
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