The Intersection of the IS* and LM* Curves Shows the and the at Which

question 19

Multiple Choice

The intersection of the IS* and LM* curves shows the and the at which both the goods market and the money market are in equilibrium.

• A)interest rate; price level price
• B)level; exchange rate level of
• C)output; exchange rate level of
• D)output; price level

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Definitions:

Competitive Industry

A Competitive Industry is characterized by many producers and consumers with the products being largely similar, leading to minimal ability for firms to set prices higher than market rates.

Long-Run Equilibrium

is an economic condition where all inputs and outputs in a market are fully adjusted to any changes, leading to a stable state of operations over time.

Profit

The financial gain obtained when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Competitive Return

The earning or return that an investment generates, over and above the risk-free rate, due to its competitive advantage.