When We Include the Interest Gap in the IS Model

question 129

Multiple Choice

When we include the interest gap in the IS model, the IS curve:

• A) becomes shallower, reflecting how the domestic interest rate affects investment and net exports.
• B) becomes steeper, reflecting how the domestic interest rate affects investment and net exports.
• C) becomes steeper, reflecting how the foreign interest rate affects investment and net exports.
• D) keeps the same slope, reflecting how the foreign interest rate affects investment and net exports.
• E) Not enough information is given.

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