Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the quantity of real loanable funds per time period and reserve-related (central bank) transactions in the context of the
Three-Sector-Model?
a. The quantity of real loanable funds per time period falls and reserve-related (central bank) transactions become more negative (or less positive).
b. The quantity of real loanable funds per time period falls and reserve-related (central bank) transactions remain the same.
c. The quantity of real loanable funds per time period and reserve-related (central bank) transactions remain the same.
d. The quantity of real loanable funds per time period rises and reserve-related (central bank) transactions remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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