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    Question

    Which of the following statements is NOT CORRECT in the context of an Open Economy IS-LM Model under Floating Exchange Rate (with fixed price) and Perfect Capital Mobility?

    A An expansionary fiscal policy would appreciate the domestic currency value Correct Answer Incorrect Answer
    B An expansionary monetary policy would depreciate the domestic currency value Correct Answer Incorrect Answer
    C Exchange rate has significant impact on determining the equilibrium level of income and employment Correct Answer Incorrect Answer
    D Monetary policy is fully effective in determining income and employment whereas fiscal policy is ineffective Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    Incorrect Statement: Exchange rate has significant impact on determining the equilibrium level of income and employment

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