Suppose, in the Basic Mundell-Fleming Diagram That Plots the Internal

Multiple Choice

Suppose, in the basic Mundell-Fleming diagram that plots the internal balance (IB) and external balance (EB) schedules against the interest rate (i) and government spending minus taxes (G - T) , that the economy is located at a point that is above (or to the left) of the IB schedule and also above (or to the left) of the EB schedule. In this situation the economy is experiencing

A) unacceptably high unemployment and a balance-of-payments deficit.
B) unacceptably high unemployment and a balance-of-payments surplus.
C) unacceptably rapid inflation and a balance-of-payments deficit.
D) unacceptably rapid inflation and a balance-of-payments surplus.