Purchase Solution

IS-LM graph

Not what you're looking for?

Ask Custom Question

With the help of an IS-LM graph, explain in what direction a government should change its monetary and fiscal policies if it wants to make net exports positive, that is, to run a trade surplus.

Purchase this Solution
Solution Summary

Equilibrium real GDP is discussed. The direction a government should change its monetary and fiscal policies if it wants to make net exports positive, that is, to run a trade surplus is explained.

Solution Preview

The simple and dirty answer to that is to make your currency cheap, and let other currencies appreciate against your currency. This will lower the price of your goods in other countries and make your exports more competitive. At the same time it will make other countries' goods costlier for your home market and lower imports. The net impact will be an increase in exports and a reduction in imports, or an increment in net exports.

To make your currency cheaper you will have to reduce ...

Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

View More Free Quizzes
Related BrainMass Solutions

  • Where the IS and LM curves come from, and how to draw them

    Verbally describes why the IS and LM curves are shaped the way they are, and how to draw them on a graph.

  • Shifts in IS and LM curves

    281787 IS-LM graph, IS-LM diagram needed for questions on stock market, housing prices, Fed policy Suppose that both the stock market and housing prices fall in the U.S. a.

  • IS/LM model in economics

    The money demand function in Bocconia is (M/P)d = Y − 100i. The money supply M is 1000 and the price level P is 2. For this economy, graph the LM curve for i ranging from 0 to 8. Interpret the LM curve intuitively.

  • IS LM Curve

    (c) Graph the LM curve for interest rates between 0 and 8, with interval of one-half of a percentage point. See the graph above Shows how to draw IS and LM curves.

  • Effects of MS, MD, and the Price Index on the LM Function

    When money supply decreases (MS moves to MS2 in the graph below), the LM curve shifts left (for a given income, Y); This change is denoted by the blue lines.

  • Effects of Changes in Nominal Money Supply and Price Levels

    (bottom graph) For a given price, the aggregate quantity of output demanded is determined by the intersection of the IS/LM curves.

  • Deriving IS, LM and aggregate demand curves

    The money demand function in Highland is. (M/P)d = Y-100r. The money supply M is 1,200 and the price level P is 2. For this economy, derive the LM equation first then graph the LM curve on the same diagram as you have in part a.

  • Analysis of IS/LM curves

    What happens in the IS-LM graph? The LM line, which represents the money market, is unchanged, as neither policy directly affects this market. The IS line however, does move.

  • IS-LM setup

    Under an IS-LM setup this can be shown by a right shift in the LM curve (from LM1 to LM2 in the accompanying graph).

View More Related Solutions