Exhibit: IS*-LM* a Small Open Economy with a Floating

question 94

Multiple Choice

Exhibit: IS*-LM* A small open economy with a floating exchange rate is initially at equilibrium A with IS*₁, LM*₁, equilibrium exchange rate e₂, and equilibrium output Y₁. If there is an increase in government spending to IS*₂, the new equilibrium will be at _____, holding everything else constant.

• A)A
• B)B
• C)C

---

Definitions:

Income Before Taxes

A financial measure indicating the profitability of a company before accounting for its tax expense.

Income Tax Expense

The total amount of income tax a company expects to pay to tax authorities, reflecting the cost of taxes on its pre-tax income.

Discontinued Operations

Components of a business, such as a department or segment, that have been disposed of or sold.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and costs, indicating the company's overall profitability.