During the Asian economic crisis in 1997, capital flight from Asia led to a surg

Question

During the Asian economic crisis in 1997, capital flight from Asia led to a surge in capital inflows to the U.S. If the U.S. economy was at potential output with a flexible exchange rate before the crisis, then as a result of these capital inflows, all of the following would be true EXCEPT:

a. The U.S. dollar would appreciate.

b. The IS curve in the U.S. would shift to the left.

c. The MP curve in the U.S. would shift to the left. d. The AD curve in the U.S. would shift to the left.

e. None of the above.

and why?

Explanation / Answer

c.

The MP curve in the U.S. would shift to the left

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