Answer-The slope of the BP curve is (MPM + MPS)/φ. With MPM = 0.12, MPS = 0.18, φ = 0.6, following...

An autonomous improvement in the current account X shifts the BP curve RIGHTWARD at every interest rate, a higher level of income is consistent with BOP equilibrium improved current account can absorb more import leakage. Horizontal shift XMPM 500.12 416.7. Only MPM not MPS drains the current account when income rises MPS leaks to saving, not imports. Note Trap Option D uses MPM MPS 0.30 in the denominator that is the SLOPE formula numerator, not the shift formula. The shift uses MPM alone.

Question

The slope of the BP curve is (MPM + MP

S /φ. With MPM = 0.12, MPS = 0.18, φ = 0.6, following an autonomous increase in exports ΔX = 50, which describes the BP curve shift?

A BP curve shifts leftward (downward) by ΔY = ΔX/MPM ≈ 417 units

B BP curve shifts rightward (downward) by ΔY = ΔX/MPM ≈ 416.7 units, as higher export income improves the current account, allowing higher income at the same interest rate

C BP curve rotates clockwise, becoming steeper

D BP curve shifts rightward by ΔY = ΔX/(MPM + MPS) = 50/0.30 ≈ 167 units

Practice Next

More Research Questions

What is the standard deviation of first n natural numbers?
If the public consumes €100 billion less and the government purchases €100 billion more (other things unchanging), which of the following stateme...
When estimating a structural equation in a simultaneous-equation model (e.g., a supply-demand model), why does the use of Ordinary Least Squares (OLS) on a...
A government levies a Pigouvian tax t = 40. Firm A: MAC_A = 20 + 2q_A; Firm B: MAC_B = 10 + 3q_B. What are optimal abatement levels?
In a market economy
In a market economy 
Which of the following is true for Disposable Income?
Consider the following Utility function U(x,y) = 9x+11y. The price of x and y are 8 and 10 respectively. The income of the consumer is 120. Calculate the m...
When a firm’s decision to produce decreases the wellbeing of others, but the firm does not compensate those others. It is a case of______.
The Balassa-Samuelson effect provides a structural explanation for PPP deviations. It predicts that:

Hey! Ask a query

The slope of the BP curve is (MPM + MP

Detailed Solution

More Research Questions

Hey! Ask a query

Please Register/Login