In a small open economy with fixed exchange rate and imperfect capital mobility, which of the following is/are CORRECT? (A) Fiscal contraction leads to BoP deficit in the short run if the slope of LM is greater than the slope of the BoP curve (B) Fiscal contraction leads to BoP deficit in the short run if the slope of LM is less than the slope of the BoP curve (C) Monetary expansion leads to BoP surplus in the short run irrespective of the slopes of LM and BoP curves (D) Monetary expansion leads to BoP deficit in the short run irrespective of the slopes of LM and BoP curves

IIT JAM 2024 Question 31: Open-economy macroeconomics

In a small open economy with fixed exchange rate and imperfect capital mobility, which of the following is/are CORRECT?

Select all that apply.

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

This question is on Policy under fixed exchange rates, part of Open-economy macroeconomics in International Economics.

What monetary and fiscal policy can do when the central bank holds the exchange rate.

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