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which curve is affected if foreign countries buy more Canadian goods? ( using IS-LM-FE curve )

which curve is affected if foreign countries buy more Canadian goods? ( using IS-LM-FE curve )

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Answer #1

The increase in the exports will allow the Canadian firms to produce more goods and that will increase the output and income of the local economy, Increased output will shift the IS curve to the right and it will lead to a higher interest rate and higher output in the nation,

Exports will also increase the inflow of forex in the nation and increase the money supply, at a higher money supply the LM curve will shift to the right, it will decrease the interest rate and increase the output. FE will remain the same.

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