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Exhibit: IS*-LM* a Small Open Economy with a Floating

Question 94

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Exhibit: IS*-LM* Exhibit: IS*-LM* A small open economy with a floating exchange rate is initially at equilibrium A with IS*<sub>1</sub>, LM*<sub>1</sub>, equilibrium exchange rate e<sub>2</sub>, and equilibrium output Y<sub>1</sub>. If there is an increase in government spending to IS*<sub>2</sub>, the new equilibrium will be at _____, holding everything else constant. A) A B) B C) C D) D A small open economy with a floating exchange rate is initially at equilibrium A with IS*1, LM*1, equilibrium exchange rate e2, and equilibrium output Y1. If there is an increase in government spending to IS*2, the new equilibrium will be at _____, holding everything else constant.


A) A
B) B
C) C
D) D

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