QUESTION 1

In Brazil, the central bank has kept its policy interest rate at 3.75% since last year and plans to maintain that policy in 2021. Now the government of Brazil is considering a fiscal stimulus package this year to help the economy recover from the COVID-19 pandemic recession. If the government implements with the fiscal stimulus policy and the central bank maintains its policy interest rate,

a. theIS will shift to the right and the LM curve will shift downward.

b. theIS curve will shift to the left and the LM curve will shift upward.

c. theLM curve will shift downward and the IS curve will remain unchanged.

d. theIS curve will shift to the right and LM curve will remain unchanged.

e. theIS and LM curves will both remain unchanged.

QUESTION 2

The Reserve Bank of India (RBI) has kept its target interest rate at 4% in the past several months. Now the RBI wants to stimulate the Indian economy via a conventional monetary policy. As a result of this policy,

a. theIS curve will not shift, while the LM curve will rotate downward.

b. theIS curve will shift to the right and the LM curve will rotate upward.

c. theIS curve will shift to the left and the LM curve will rotate downward.

d. theIS curve will shift to the right and the LM curve will rotate downward.

e. the IS curve will shift to the right, while the LM curve will remain unchanged