Exhibit: Shifting IS* and LM* a Small Open Economy

question 51

Multiple Choice

Exhibit: Shifting IS* and LM* A small open economy with a floating exchange rate is initially in equilibrium at A with Holding all else constant, if the government imposes a tariff on imports in order to protect domestic jobs, then the _____ curve will shift to _____.

• A)LM₁*; LM₂*
• B)LM₁*; LM₃*
• C)IS₁*; IS₂*
• D)IS₁*; IS₃*

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Definitions:

Profit

The financial gain achieved when the revenues generated from business activities exceed the expenses, costs, and taxes needed to sustain the activity.

Accounting

The systematic process of recording, analyzing, and interpreting financial information.

Identifies

Identifies means to recognize or establish the nature, characteristics, or details of something or someone, especially for the first time.

Eliminates Need

Refers to the process or action that makes a particular requirement or necessity obsolete or unnecessary.