As the economy moves up and to the right along the IS curve,which of the following will occur when exchange rates are flexible?
A)investment spending increases
B)consumption increases
C)the domestic currency depreciates
D)all of the above
E) none of the above

Question

Quizplus · Accepted Answer

As the economy moves up and to the right along the IS curve, investment spending and consumption both increase. This leads to an increase in demand for foreign currency, causing the domestic currency to depreciate. Hence, all of the above options are correct.

As the Economy Moves Up and to the Right Along