In the IS-LM framework with an external sector (so the IS equation now includes a net export term), an appreciation of the (real) exchange rate (A) would necessarily result in a decrease in the equilibrium value of income (B) would result in a decrease in the equilibrium value of income only if the LM curve is vertical (C) would result in a decrease in the equilibrium value of income only if the Marshall-Lerner condition is satisfied (D) would result in a decrease in the equilibrium value of income only if the government maintains a balanced budget

DSE 2009 Question 19: Open-economy macroeconomics

In the IS-LM framework with an external sector (so the IS equation now includes a net export term), an appreciation of the (real) exchange rate

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Open-economy macroeconomics has come up 55 times in 7 exams since 2006.

This question is on The Mundell-Fleming model: IS, LM and BP, part of Open-economy macroeconomics in International Economics.

The open-economy extension of IS-LM with a balance-of-payments schedule.

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