A small open economy with a floating exchange rate is initially in equilibrium at A with IS1, LM1. Holding all else constant,

Question

3 years ago

6

A small open economy with a floating exchange rate is initially in equilibrium at A with IS1, LM1. Holding all else constant,

if domestic consumers develop greater preferences for imported goods, then the _____ curve will shift to _____.A. LM; LM*2B. LM; LM*3C. IS; IS*2D. IS; IS*3

Business

1 answer:

irga5000 [103] · Answer 1 · 2022-03-31T18:18:58+03:00

irga5000 [103]3 years ago

3 0

Answer:

Option D is correct

Explanation:

The curve would shift to the left because there Is an increase in import product that is the I + G + X curve would fall as the S + T +IM curve rises due to increase in IM(import product) causing the income fall.

A small open economy with a floating exchange rate is initially in equilibrium at A with IS*1, LM*1. Holding all else constant,

A small open economy with a floating exchange rate is initially in equilibrium at A with IS1, LM1. Holding all else constant,