Use the Following to Answer Questions :
Exhibit: IS*-LM $I S _ { 1 } ^ { * }$

question 58

Multiple Choice

Use the following to answer questions :
Exhibit: IS*-LM*
-(Exhibit: IS*-LM*) A small open economy with a floating exchange rate is initially at equilibrium A with $I S _ { 1 } ^ { * }$ $L M _ { 1 } ^ { * }$ equilibrium exchange rate e₂, and equilibrium output Y₁. If there is a monetary expansion to $L M _ { 2 } ^ { * }$ the new equilibrium will be at ____, holding everything else constant.

• A) A
• B) B
• C) C
• D) D

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of consumers increases, opposite to normal goods.

Income Decreases

A situation where individuals or households experience a reduction in earnings, affecting their purchasing power and economic stability.

Demand

The volume of goods or services that consumers are ready and financially able to buy at several prices over a designated period.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price, at a specific time.