In a small open economy, a decrease in its exchange rate will net exports and shift the curve.
A)increase; IS
B)decrease; IS
C)increase; LM
D)decrease; LM

Question

Quizplus · Accepted Answer

A decrease in exchange rate will make exports relatively cheaper and imports relatively more expensive, which will lead to an increase in net exports. This increase in net exports will shift the IS curve to the right.

In a Small Open Economy, a Decrease in Its Exchange