The Figure Below Shows an IS-LM-FE Model for an Economy

question 4

Multiple Choice

The figure below shows an IS-LM-FE model for an economy with fixed exchange rates. Initially the economy is at point A, a triple intersection. Here, the FE curve is steeper than the LM curve. If monetary authorities are unable to sterilize, output will end up:

• A)at Y₁.
• B)to the left of Y₁.
• C)To the right of Y1.
• D)at Y₀.

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Definitions:

Draft

A preliminary version of a piece of writing or document that is open for discussion, modification, or approval.

Instrument Value

The actual worth or significance of a financial document, like a stock or bond, in transactions.

Maker

The party in a financial transaction who creates or signs a promissory note, thereby agreeing to pay the note's value to a specified party.

Drawer

The person who writes or signs a bill of exchange, such as a check, thus creating a financial obligation.