Assume an initial equilibrium position for the economy (at the three-way intersection of The IS, LM, and BP curves), and also assume that the BP curve is vertical. This situation Is one where there is __________ of financial capital internationally, and, from this initial equilibrium, expansionary fiscal policy would initially lead to a balance-of-payments
__________.

Question

Quizplus · Accepted Answer

A vertical BP curve indicates perfect immobility of financial capital internationally. Expansionary fiscal policy will lead to an increase in imports and hence, initially, a balance-of-payments deficit.

Assume an Initial Equilibrium Position for the Economy (At the Three-Way