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

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

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