The figure below shows an IS-LM-FE model for an economy with fixed exchange rates. Initially the economy was at point A, a triple intersection. Here, the FE curve is flatter than the LM curve. If monetary authorities are unable to sterilize, the interest rate will end up: A)at i₁. B)above i₁. C)between i₁ and i₀. D)at i₀.

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The Answer of The figure below shows an IS-LM-FE model for an economy with fixed exchange rates. Initially the economy was at point A, a triple intersection. Here, the FE curve is flatter than the LM curve. If monetary authorities are unable to sterilize, the interest rate will end up: A)at i₁. B)above i₁. C)between i₁ and i₀. D)at i₀.

The Figure Below Shows an IS-LM-FE Model for an Economy