In a Flexible Exchange Rate Regime, an Increase in the Foreign

question 35

Multiple Choice

In a flexible exchange rate regime, an increase in the foreign interest rate will cause:

• A) the IP curve to shift to the right/down.
• B) the IP curve to shift to the left/up.
• C) a movement along the IP curve.
• D) the IP curve to become vertical.
• E) the IP curve to become horizontal.