As G increases, IS 1 shifts to IS 2 . At new equilibrium e', interest rate also increases and i > i*. Here,2 things are happening: a) there will now be capital inflow as a result capital A/c surplus b) Since, AD and Y increased, import demand will increase which will lead to current A/c deficit. Since, the magnitude of Capital A/c surplus will be much higher than the magnitude of current A/c deficit; there is BOP surplus. As a result domestic currency appreciates; dd for rupee has increased. So, there will be capital inflow which will bring back the interest rate to its original level. As a result, exports decrease and Imports increase (imports have become cheaper) [Net exports falls] IS shifts back to initial level and equilibrium in the goods market is restored. In a small open economy with a floating exchange rate, the supply of real money balances is fixed and a rise in government spending cannot change the interest rate so that net exports must fall to maintain equilibrium in the goods market.
Select the letter that will replace the question mark (?) in the given letter series.
a, d, h, n, ?
Ten people are sitting in two parallel rows containing 5 people each, in such a way that there is equal distance between adjacent persons.
In Row...
Six persons, Vinay, Madhav, Nilesh, Sagar, Arvind, Rajesh, are standing in two rows facing towards each other such that three persons are in a row.
Find the upcoming numbers in this series.
19, 28, 46, 82, 154,?
If 84 × 13 = 8, 37 × 13 = 6, 26 × 11 = 6, then 56 × 22 = ?
M introduces K saying “She is the wife of the grandson of the father of my father”. How is K related to M?
Four letter-clusters have been given, out of which three are alike in some manner and one is different. Select the odd letter-cluster.
Select the option that is related to the third term on the same basis as the second term is related to the first term.
ABROAD : ZCPQXG :: MARKET : ?
Vinita, Anita, Preeti and Kunjan are dining around a square table facing the centre. Each friend is sitting at the middle of one of the four sides. Kunj...