If the central bank targets interest rates, then the LM curve is
a. vertical.
b. horizontal.
c. upward sloping.
d. downward sloping.
Question 2
Assuming a flexible exchange rate, then an expansionary monetary policy in the foreign exchange market will shift
a. the demand curve for foreign exchange to the right
b. the demand curve for foreign exchange to the right and the supply curve of foreign exchange to the left.
c. both the demand curve for foreign exchange and the supply curve of foreign exchange to the right.
d. both the demand curve for foreign exchange to the left.
e. none of the above.
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