argue that the: (a) IS curve is nearly vertical (b) LM curve is nearly horizontal. onsiveness of money demand to the interest rate is large. responsiveness of money demand to the interest rate is small. 0 points) In the Mundell-Fleming model, if the price level falls, then the equilibrium income rises and the real exchange rate depreciates. (b) rises and the real exchange rate appreciates. (c) falls and the real exchange rate depreciates. (d) falls and the real exchange rate appreciates. 3. (10 points) Which of the following would be evidence that a country with a fixed exchange rate has an undervalued currency? (a) The government has a budget surplus. (b) The government has a budget deficit. (c) The central bank's foreign-currency reserves are increasing (d) The central bank's foreign-currency reserves are decreasing. 4. (10 points) The Great Depression in the United States probably cannot be considered to have started because of a leftward shift in the LA because real balances did not fall between 1929 and 1931. (b) probably was caused by a leftward shift in the LM curve because interest rates high between 1929 and 1933. r sunnly because it fell by 25 percent fr