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The Figure Below Shows an IS-LM-FE Model for an Economy

Question 4

Multiple Choice

The figure below shows an IS-LM-FE model for an economy with fixed exchange rates. Initially the economy is at point A, a triple intersection. Here, the FE curve is steeper than the LM curve. The figure below shows an IS-LM-FE model for an economy with fixed exchange rates. Initially the economy is at point A, a triple intersection. Here, the FE curve is steeper than the LM curve. If monetary authorities are unable to sterilize, output will end up: A) at Y<sub>1</sub>. B) to the left of Y<sub>1</sub>. C) To the right of Y1. D) at Y<sub>0</sub>. If monetary authorities are unable to sterilize, output will end up:


A) at Y1.
B) to the left of Y1.
C) To the right of Y1.
D) at Y0.

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