Under Fixed Exchange Rates and a Constant Price Level, the Automatic

question 22

Multiple Choice

Under fixed exchange rates and a constant price level, the automatic adjustment process produces balance-of-payments equilibrium as

• A) the LM curve shifts along the fixed IS and BP curves.
• B) the IS curve shifts along the fixed LM and BP curves.
• C) the IS, LM, and BP curves all shift.
• D) the BP curve shifts to the point where the IS and LM curves intersect.

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Definitions:

Discount Rate

The rate of interest applied to calculate the present value of future cash flows.

Net Present Value

A method used to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows over a period of time.

Investment Project

A project requiring capital investment, aiming to generate financial returns or benefits in the future.

Cash Operating

Refers to the activities that involve the cash inflows and outflows from a company's primary business operations.