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As G increases, IS 1 shifts to IS 2 . At new equilibrium e', interest rate also increases and i > i*. Here,2 things are happening: a) there will now be capital inflow as a result capital A/c surplus b) Since, AD and Y increased, import demand will increase which will lead to current A/c deficit. Since, the magnitude of Capital A/c surplus will be much higher than the magnitude of current A/c deficit; there is BOP surplus. As a result domestic currency appreciates; dd for rupee has increased. So, there will be capital inflow which will bring back the interest rate to its original level. As a result, exports decrease and Imports increase (imports have become cheaper) [Net exports falls] IS shifts back to initial level and equilibrium in the goods market is restored. In a small open economy with a floating exchange rate, the supply of real money balances is fixed and a rise in government spending cannot change the interest rate so that net exports must fall to maintain equilibrium in the goods market.
The Fertilizer (control) order came into force in
Which seed class has the minimum genetic purity requirement of 99%?
Flooding is the method used for the reclamation practice in which of the problematic soil?
In which soil forming process are sodium ions accumulated on the clay's exchange complex, resulting in the formation of sodic soils?
Soil texture is determined most commonly by which method?
Flooding is the method used for the reclamation practice in which of the problematic soil?
Die back in citrus is caused due to the deficiency of ____
…………………..measures the proportion of cation exchange sites occupied by sodium.
The ESP of saline soils is _____%
Which soil property is least affected by the size and arrangement of soil particles?