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When We Include the Interest Gap in the IS Model

Question 77

Multiple Choice

When we include the interest gap in the IS model, the IS curve:


A) becomes shallower, reflecting how the domestic interest rate affects investment and net exports.
B) becomes steeper, reflecting how the domestic interest rate affects investment and net exports.
C) becomes steeper, reflecting how the foreign interest rate affects investment and net exports.
D) keeps the same slope, reflecting how the foreign interest rate affects investment and net exports.
E) Not enough information is given.

Correct Answer:

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