Assume that the central bank sells government securities in the open market. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium
a. The real risk-free interest rate rises and GDP Price Index rises.
b. The real risk-free interest rate falls and GDP Price Index falls.
c. The real risk-free interest rate rises and GDP Price Index falls.
d. The real risk-free interest rate and GDP Price Index remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.D
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Negotiable certificates of deposit were developed in order to
A) compete for loan business that had been going to the commercial paper market. B) circumvent interest rate regulations on deposits. C) increase assets that were acceptable as collateral for discount loans. D) circumvent reserve requirements.
Those who favor a passive approach to policy believe that:
a. discretionary monetary policy can be used to help the economy since monetary policy lags are short b. discretionary fiscal policy can be used to help the economy since fiscal policy lags are short. c. lags associated with implementing policies are too long and unstable for discretionary policy to be effective. d. despite the lags involved, implementing discretionary policy is preferable to inaction. e. automatic stabilizers cannot be used to help the economy since monetary policy lags are short.
One "design principle" that makes informal, community-based solutions to public goods and common resource problems more effective is:
A. clear distinctions between who is and is not allowed to access the resource. B. the participation of resource users in setting the rules for use. C. the ability of users to monitor one another. D. All of these are important to the effectiveness of community-based solutions.
If the MPC = 0.75 and a household obtains $50,000 more dollars then how much would the household spend of the additional $50,000?
A. $50,000 B. $12,500 C. $37,500 D. $40,000