Assume that the central bank lowers the discount to increase the nation's monetary base. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the reserve-related (central bank) transactions and monetary base in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium
a. The reserve-related (central bank) transactions become more positive (or less negative) and monetary base rises.
b. The reserve-related (central bank) transactions become more negative (or less positive) and monetary base falls.
c. The reserve-related (central bank) transactions become more positive (or less negative) and monetary base remains the same.
d. The reserve-related (central bank) transactions and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.C
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