Assume that foreign capital flows into a nation rise due to expected increases in stock market appreciation. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the reserves account and monetary base in the context of the Three-Sector-Model?
a. The reserves account becomes more negative (less positive) and monetary base falls
b. The reserves account becomes more negative (less positive) and monetary base falls.
c. The reserves account and monetary base remain the same.
d. The reserves account becomes more negative (less positive) and monetary base rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.D
You might also like to view...
One reason why banks might increase their reserve-deposit ratio above the minimum level in times of economic uncertainty is that
A. banks are most profitable when new loans are issued. B. banks may have insufficient required reserves. C. banks are initiating quantitative easing D. banks may find only limited lending opportunities that seem sufficiently safe.
In a game, which strategic choice is called a dominant strategy?
When the Fed sells government bonds to a bank, the initial effect on the bank is that its
a. assets increase b. assets remain the same c. liabilities decrease d. assets decrease e. liabilities increase
Economic growth
A. Means that capacity has decreased in the short run. B. Causes the production possibilities curve to shift inward. C. Refers to an increase in output. D. Cannot be sustained over time.