The internal and external equilibrium occurs when the IS curve crosses the LM curve above the BP curve.

Question

Quizplus · Accepted Answer

The internal and external equilibrium occurs when the IS curve intersects with the BP curve at the point where the LM curve intersects with the BP curve. If the IS curve crosses the LM curve above the BP curve, it would result in an appreciation of the exchange rate and a shift in the BP curve, leading to a new intersection point that is not at internal and external equilibrium.

The Internal and External Equilibrium Occurs When the IS Curve