With Fixed Exchange Rates,perfect Asset Substitutability,and Perfect Capital Mobility

question 11

Multiple Choice

With fixed exchange rates,perfect asset substitutability,and perfect capital mobility

• A)the LM curve is horizontal.
• B)the LM curve is vertical.
• C)the BP curve is horizontal.
• D)the BP curve is vertical.

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Definitions:

Directly Proportional

A relationship between two variables where they increase or decrease in conjunction with each other at a constant ratio.

Absorption

The process by which one substance becomes taken up or incorporated into another substance, such as a gas being absorbed by a liquid.

Wavelength

The distance between consecutive crests or troughs in a wave, often used in the context of electromagnetic radiation.

Electromagnetic Radiation

Energy that travels through space in the form of waves, encompassing a broad spectrum from radio waves to gamma rays.