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Exhibit: Shifting IS* and LM* a Small Open Economy

Question 19

Multiple Choice

Exhibit: Shifting IS* and LM* Exhibit: Shifting IS* and LM* A small open economy with a floating exchange rate is initially in equilibrium at A with Holding all else constant, if domestic consumers develop greater preferences for imported goods, then the _____ curve will shift to _____. A) LM<sub>1</sub>*; LM<sub>2</sub>* B) LM<sub>1</sub>*; LM<sub>3</sub>* C) IS<sub>1</sub>*; IS<sub>2</sub>* D) IS<sub>1</sub>*; IS<sub>3</sub>* A small open economy with a floating exchange rate is initially in equilibrium at A with Exhibit: Shifting IS* and LM* A small open economy with a floating exchange rate is initially in equilibrium at A with Holding all else constant, if domestic consumers develop greater preferences for imported goods, then the _____ curve will shift to _____. A) LM<sub>1</sub>*; LM<sub>2</sub>* B) LM<sub>1</sub>*; LM<sub>3</sub>* C) IS<sub>1</sub>*; IS<sub>2</sub>* D) IS<sub>1</sub>*; IS<sub>3</sub>* Holding all else constant, if domestic consumers develop greater preferences for imported goods, then the _____ curve will shift to _____.


A) LM1*; LM2*
B) LM1*; LM3*
C) IS1*; IS2*
D) IS1*; IS3*

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