Point B can only be reached in the absence of capital mobility

A new equilibrium is reached at point C

A new equilibrium is reached at point B.

The TR curve will shift down until it passes through point B.

A) fixed exchange rates; (B) increase in government deficits due to higher interest rates

(A) fixed exchange rates; (B) lower demand for money due to higher interest rates leading to an increased demand for consumption good

(A) flexible exchange rates; (B) exchange rate depreciating

(A) flexible exchange rates; (B) exchange rate appreciating

(A) the exchange rate; (B) the exchange rate

(A) the exchange rate; (B) the interest rate

(A) the interest rate; (B) the exchange rate

(A) the interest rate; (B) the interest rate

(A) contraction ; (B) contraction

(A) contraction ; (B) expansion

(A) expansion ; (B) contraction

(A) expansion ; (B) expansion

The fixed exchange rate system imposes strict discipline on the central bank.

The economy is vulnerable to foreign but not domestic demand disturbances

The Taylor Rule schedule is irrelevant

Shifts in world interest rates can pose a risk to the sustainability of the fixed exchange rate