If Both Investment and Net Exports Are Totally Insensitive to Changes

question 27

Multiple Choice

If both investment and net exports are totally insensitive to changes in the interest rate, then

• A) the IS curve is horizontal.
• B) the IS curve is vertical.
• C) the LM curve is horizontal.
• D) the LM curve is vertical.
• E) the IS curve is horizontal and the LM curve is vertical; a unique equilibrium pair R*, Y*) is thereby defined unambiguously.

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Definitions:

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