Assume that the central bank increases the reserve requirement. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the quantity of real loanable funds per time period and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. Real GDP falls, and nominal value of the domestic currency rises.
b. Real GDP rises, and nominal value of the domestic currency falls.
c. Real GDP rises, and nominal value of the domestic currency rises.
d. Real GDP rises, and nominal value of the domestic currency remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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If money is used as a mechanism to hold purchasing power for a period of time it is functioning as a
A) unit of account. B) medium of exchange. C) store of value. D) standard of value.
Refer to Figure 18-1. Area E + H represents
A) the portion of sales tax revenue borne by consumers. B) the portion of sales tax revenue borne by producers. C) the excess burden of the sales tax. D) sales tax revenue collected by the government.
Everything else equal, if the Fed decided to fix the euro/dollar exchange rate, what would be the impact on the interest rate in the U.S. if the euro started to appreciate in value and why?
What will be an ideal response?
An efficiency wage
a. gives an employee an incentive to shirk his duties. b. is lower than the equilibrium wage for that position and region. c. is higher than the equilibrium wage for that position and region. d. both a and b are correct.