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In the IS-LM model, what happens to the equilibrium level of income if there is a recession in foreign economies?
  • a)
    The equilibrium income increases.
  • b)
    The equilibrium income remains unchanged.
  • c)
    The equilibrium income decreases.
  • d)
    The equilibrium income experiences fluctuations.
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
In the IS-LM model, what happens to the equilibrium level of income if...
A recession in foreign economies reduces their imports, which lowers foreign demand for the open economy's exports. This causes a leftward shift in the IS curve, leading to a decrease in the equilibrium level of income.
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In the IS-LM model, what happens to the equilibrium level of income if there is a recession in foreign economies?a)The equilibrium income increases.b)The equilibrium income remains unchanged.c)The equilibrium income decreases.d)The equilibrium income experiences fluctuations.Correct answer is option 'C'. Can you explain this answer?
Question Description
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