If Short-Run Equilibrium in the Mundell-Fleming Model Is Represented by a Graph

question 10

Multiple Choice

If short-run equilibrium in the Mundell-Fleming model is represented by a graph with Y along the horizontal axis and the exchange rate along the vertical axis, then the IS* curve:

• A)slopes downward and to the right because the higher the exchange rate, the lower the level of net exports and, therefore, of short-run equilibrium income in the goods market.
• B)is vertical because there is only one investment level that is consistent with the world interest rate.
• C)is vertical because the exchange rate does not enter into the IS* equation.
• D)slopes downward and to the right because the higher the exchange rate, the higher the level of net exports and, therefore, of short-run equilibrium income in the goods market.

---

Definitions:

Respiratory Syncytial Virus

A common virus that causes infections of the lungs and respiratory tract, especially severe in infants and the elderly.

Hearing Test

A clinical assessment used to evaluate an individual's hearing sensitivity and ability across a frequency range.

Full-Term Infant

A baby born after completing the normal gestational period, usually between 37 and 42 weeks of pregnancy.

Birth Weight

The weight of a newborn measured immediately after birth, an important indicator of neonatal health and wellbeing.