Assuming Perfect Capital Mobility and a Fixed Exchange Rate,then an Increase

question 34

Multiple Choice

Assuming perfect capital mobility and a fixed exchange rate,then an increase in government spending shifts

• A)the IS schedule only.
• B)both the IS and LM schedules to the left.
• C)both the IS and LM schedules to the right.
• D)the LM schedule to the left and the IS schedule to the right.

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Definitions:

Interest Rates

The fee, shown as a percentage of the total amount loaned, that a lender imposes on a borrower for the right to use their funds.

Investors

Individuals or entities that allocate capital with the expectation of receiving financial returns, encompassing methods such as buying stocks, bonds, or real estate.

Required Rate

A rephrased definition: The minimum return rate required by investors to consider investing in a particular asset or project.

Coupon Interest Rate

Stated rate of interest on a bond, defined as the coupon payment divided by the par value.