The intersection of the IS and LM curves shows: the balance of payments deficit

Question

The intersection of the IS and LM curves shows: the balance of payments deficit or surplus the short-run equilibrium interest rate and the output level in the economy. the short-run trade balance. the long-run equilibrium inflation rate and the natural rate of unemployment in the economy. QUESTION 8 The monetary trilemma describes the choice an economy faces between potential output, price levels, and the trade balance. exchange rate stability, monetary policy autonomy, and freedom of financial flows. aggregate demand, the multiplier effect, and fiscal policy. interest rates, income levels, and the real money supply

Explanation / Answer

a) A point where the IS and the LM curve meet is the equilibrium point of interest rate (LM and the money supply) and the good market (IS curve). The answer is "B".

b) Monetary trilemma is a situation where the economy can't achieve a free flow of capital, autonomous monetary policy, and fixed exchange rate together. The answer is "B".

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