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Questions › DSE › DSE 2012 › Q58
2 marksInternational Economics › Open-economy macroeconomics › The Mundell-Fleming model: IS, LM and BPHardabout 4 min

DSE 2012 Question 58: Open-economy macroeconomics

Write the goods market clearing level of output as a function of the real exchange rate ε\varepsilonε and other parameters. If you plot this relationship between YYY and ε\varepsilonε in the Y,εY,\varepsilonY,ε plane (with ε\varepsilonε on the vertical axis), you will get

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Plain-text version

Write the goods market clearing level of output as a function of the real exchange rate ε and other parameters. If you plot this relationship between Y and ε in the Y,ε plane (with ε on the vertical axis), you will get (A) A positively sloped schedule if the Marshall-Lerner condition is satisfied (B) A negatively sloped schedule if the Marshall-Lerner condition is satisfied (C) A positively sloped schedule irrespective of the Marshall-Lerner condition (D) A negatively sloped schedule irrespective of the Marshall-Lerner condition

Also written as: Write the goods market clearing level of output as a function of the real exchange rate epsilon and other parameters. If you plot this relationship between Y and epsilon in the Y,epsilon plane (with epsilon on the vertical axis), you will get

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

What this question tests

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.

TestStop has 12 past-paper questions on this subtopic; the nearest in year are below.

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Question from the DSE 2012 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.