Which of the following statements is true?
A)The open-economy IS curve is derived in the same way that the closed-economy IS curve is derived.
B)The closed-economy IS curve is downward sloping,but the open-economy IS curve is upward sloping.
C)Some factors that shift the IS curve in the closed economy in one direction will shift the IS curve in the open economy in the opposite direction.
D)Factors that raise a country's current net exports,given domestic output and the domestic real interest rate,shift the open-economy IS curve up.

Question

Quizplus · Accepted Answer

The open-economy IS curve is derived in the same way as the closed-economy IS curve with the addition of a net exports variable. The IS curve for an open economy is upward sloping because an increase in the real interest rate leads to an increase in net exports. Therefore, factors that increase net exports at a given domestic output and real interest rate will shift the open-economy IS curve up.

Which of the Following Statements Is True