Question
Under a fixed exchange rate system with perfect capital
mobility, what happens when the government increases its spending?Solution
In a fixed exchange rate system with perfect capital mobility, an increase in government spending shifts the IS curve to the right, increasing output and the interest rate. However, because capital is perfectly mobile, the higher domestic interest rate would attract foreign capital, leading to upward pressure on the exchange rate (appreciation). To maintain the fixed exchange rate, the central bank intervenes by increasing the money supply, which shifts the LM curve to the right, lowering the interest rate back to the world interest rate.
Select the antonym of the given word.
BROAD
In the given question, a word has been given and there are three ways in which the word has been used, in similar or different forms. You need to see w...
A post with little work but high salary.
Direction: In each of the questions given below, four words are given in bold. These four words may or may not be in their correct position. The senten...
Tamper
(i) To tamper with a constitution that had so proved its quality seemed not so much a sacrilege as a folly.
(ii) At least he was tr...
Select the word which means the same as the group of words given.
An arrangement of events or dates in the order of their occurrence
Entail
A. Child obesity has become an increasingly serious problem inevitably entailing serious health hazards.
B. Jackson's versions...
In the question given below, a word has been given and there are three ways in which the word has been used, in similar or different forms. You need to...
In each of the following sentences, a word has been highlighted. Choose the option that can most appropriately replace the highlighted word without cha...
In the given question, a word has been given and there are three ways in which the word has been used, in similar or different forms. You need to see w...
