The AA schedule shows
A) interest rate and output pairs at which the foreign exchange market and the domestic money market are in equilibrium.
B) exchange rate and output pairs at which the foreign exchange market and the domestic money market are in equilibrium.
C) interest rate and output pairs at which only the foreign exchange market is in equilibrium.
D) exchange rate and output pairs at which only the foreign exchange market is in equilibrium.
E) exchange rate and output pairs at which only the domestic money market are in equilibrium.

Question

Quizplus · Accepted Answer

The AA schedule represents exchange rate and output pairs at which the foreign exchange market and the domestic money market are in equilibrium. These points indicate the set of combinations of exchange rates and levels of output where there is no pressure for the exchange rate to change, as the demand for and supply of domestic currency in the foreign exchange market and the demand for and supply of money in the domestic money market are in balance.

The AA Schedule Shows