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

Question 11

Multiple Choice

The figure below shows an IS-LM-FE model for an economy with fixed exchange rates. Initially the economy was at point A, a triple intersection. Here, the FE curve is flatter than the LM curve. The figure below shows an IS-LM-FE model for an economy with fixed exchange rates. Initially the economy was at point A, a triple intersection. Here, the FE curve is flatter than the LM curve. If monetary authorities are unable to sterilize, the interest rate will end up: A) at i<sub>1</sub>. B) above i<sub>1</sub>. C) between i<sub>1</sub> and i<sub>0</sub>. D) at i<sub>0</sub>. If monetary authorities are unable to sterilize, the interest rate will end up:


A) at i1.
B) above i1.
C) between i1 and i0.
D) at i0.

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