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A country has a fixed exchange rate, and the country is initially at a triple intersection of the IS, LM, and FE curves. Assume the
A country has a fixed exchange rate, and the country is initially at a triple intersection of the IS, LM, and FE curves. Assume the FE curve is flatter than the LM curve. A negative external capital-flow shock shifts the FE curve left. Under zero sterilization, which one of the following will happen next? Multiple Choice O Because of the incipient balance of payments deficit, the IS curve will shift rightward. O Because of the incipient balance of payments deficit, the LM curve will shift leftward. O Because of the incipient balance of payments surplus, the LM curve will shift rightward. O Because of the incipient balance of payments surplus, the IS curve will shift leftward
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