The IS/LM/BP Analysis Suggests That, If the BP Curve Is

question 10

Multiple Choice

The IS/LM/BP analysis suggests that, if the BP curve is steeper than the LM curve and The exchange rate is flexible, contractionary fiscal policy by country A will lead to __________ in country A's balance of payments and hence to __________ of A's
Currency relative to other currencies.

• A) an incipient deficit; an appreciation
• B) an incipient deficit; a depreciation
• C) an incipient surplus; an appreciation
• D) an incipient surplus; a depreciation

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