The BP schedule will be steeper the
A)more responsive capital flows are to the interest rate.
B)less responsive capital flows are to the interest rate.
C)smaller the marginal propensity to import.
D)less likely an expansionary fiscal policy will lead to a balance of payments deficit.

Question

Quizplus · Accepted Answer

If capital flows are less responsive to the interest rate, then changes in the interest rate will have less impact on the overall balance of payments. This means that the BP schedule will need to be steeper in order to achieve the same level of adjustment in response to a given change in the interest rate.

The BP Schedule Will Be Steeper the