The IS/LM/BP Analysis Suggests That an External Real Sector Shock

question 11

Multiple Choice

The IS/LM/BP analysis suggests that an external real sector shock, such as a rise in national income abroad will cause, under fixed exchange rates, a __________ shift in a Home country's BP curve (assuming that short-term financial capital is not perfectly Mobile) , a __________ in the home country's balance of payments, and __________ in The home country's national income.

• A) rightward; surplus; an increase
• B) rightward; deficit; a decrease
• C) rightward; surplus; a decrease
• D) leftward; deficit; a decrease

---

Definitions:

Production Possibilities Curve

A graphical representation showing the maximum number of goods or services that can be produced efficiently with available resources and technology.

Unattainable

Something not possible to achieve or reach, often due to inherent limitations or barriers.

Output Growth Rate

The rate at which the production of goods and services in an economy increases over a specified period.

Taxation

The practice of collecting taxes by a government to fund public services, infrastructure, and other governmental functions.