The Figure Given Below Depicts the IS-LM-FE Model with Floating

question 43

Multiple Choice

The figure given below depicts the IS-LM-FE model with floating exchange rates. The domestic currency:

• A)is under the pressure to appreciate.
• B)is under the pressure to depreciate.
• C)can remain relatively stable.
• D)is at its possible highest value in the foreign exchange market vis-à-vis other currencies.

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, discounting future amounts to their present values.

Annual Rate

Typically refers to the interest rate for a whole year, often applied in terms of loans, investments, or savings.

Invests

The act of allocating resources, usually money, with the expectation of generating an income or profit.

Present Value

The present value of a sum of money or sequence of cash flows expected in the future, calculated using a certain rate of return.