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

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Definitions:

Accrued Expense

Costs that have been incurred for goods or services but have not yet been paid for or recorded in the financial statements.

Accrued Revenues

Revenues that have been earned (through the delivery of goods or services) but not yet received in cash or recorded.

Goods

Physical items that are produced or purchased for sale by a business.