Use the Following to Answer Questions :
Exhibit: IS*-LM* and AD

question 37

Multiple Choice

Use the following to answer questions :
Exhibit: IS*-LM* and AD
-(Exhibit: IS*-LM* and AD) A small open economy with a floating exchange rate is initially in equilibrium at A with $I S _ { 1 } ^ { * }$ $L M _ { 1 } ^ { * } .$ Holding all else constant, if the domestic price level decreases, then the _____ curve will shift to _____.

• A) LM₁*; \(L M _ { 2 } ^ { * }\)
• B) LM₁*; \(L M _ { 3 } ^ { * }\)
• C) IS₁*; \(I S _ { 2 } ^ { * }\)
• D) IS₁*; \(I S _ { 3 } ^ { * }\)

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Definitions:

Rejecting

In statistical hypothesis testing, the act of concluding that the null hypothesis is unlikely given the data, often signaled by a test statistic that falls outside a specified significance level.

Type II Error

The error that occurs when a false null hypothesis is not rejected.

False Null Hypothesis

Indicates a situation where the null hypothesis is incorrectly rejected when it is in fact true.

Failing

The condition or process of not meeting a desirable or intended objective, often used in the context of academic performance or machinery operation.