In an IS-LM Model with Flexible Exchange Rates and Perfect

question 33

Multiple Choice

In an IS-LM model with flexible exchange rates and perfect capital mobility, a restriction in money supply will

• A)decrease the level of output permanently but increase the interest rate only temporarily
• B) decrease both the level of output and the interest rate but only temporarily
• C) temporarily decrease the level of output and temporarily increase the interest rate
• D)shift the LM-curve first to the left and then back to the right as the central bank is forced to buy foreign currency reserves
• E)both C and D

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Definitions:

LIFO

An inventory valuation method called "Last In, First Out" where the most recently produced or purchased items are the first to be expensed as cost of goods sold.

Cordless Screwdrivers

Electric screwdrivers that operate without a direct power supply connection, using rechargeable batteries instead.

U.S.GAAP

A set of accounting standards and principles provided by the Financial Accounting Standards Board (FASB) for companies in the United States, ensuring transparency and consistency in financial reporting.

Inventory

Assets held for sale in the ordinary course of business, in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process or rendering of services.