Exhibit: Risk Premium A small open economy with a floating exchange rate is initially in equilibrium at A with IS₁*; LM₁*. If there is an increase in the risk premium, then LM₁* will shift to _____ and IS₁* will shift to _____. A)LM₂* ; IS₂* B)LM₂* ; IS₃* C)LM₃* ; IS₂* D)LM₃* ; IS₃*

Question

Quizplus · Accepted Answer

The Answer of Exhibit: Risk Premium A small open economy with a floating exchange rate is initially in equilibrium at A with IS₁*; LM₁*. If there is an increase in the risk premium, then LM₁* will shift to _____ and IS₁* will shift to _____. A)LM₂* ; IS₂* B)LM₂* ; IS₃* C)LM₃* ; IS₂* D)LM₃* ; IS₃*

Exhibit: Risk Premium a Small Open Economy with a Floating