If the BP curve is above the point of intersection of the IS and LM curves,the nation will:

Question

Quizplus · Accepted Answer

If the BP curve is above the point of intersection of the IS and LM curves, it means that at that level of income, the demand for foreign goods and services is greater than the demand for domestic goods and services. This leads to an excess supply of domestic currency in the foreign exchange market, which puts pressure on the exchange rate to depreciate. This depreciation makes imports more expensive and exports cheaper, which eventually leads to a balance of payments deficit.

If the BP Curve Is Above the Point of Intersection