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 real risk-free interest rate and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls and reserve-related (central bank) transactions become more negative (or less positive).
b. The real risk-free interest rate rises and reserve-related (central bank) transactions become more negative (or less positive).
c. The real risk-free interest rate falls and reserve-related (central bank) transactions remain the same.
d. The real risk-free interest rate 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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For a major country with extensive capital flows, what is the effect of a decrease in interest rates?
A. A currency depreciation and increased net exports B. A currency depreciation and reduced net exports C. A currency appreciation and increased net exports D. A currency appreciation and reduced net exports
Consider the following situation. Tuition at State University is $10,000 per year. Each of the students listed below paid their own tuition bills. Who among them incurred the greatest sunk cost?
A) The student who received a two-year associate's degree B) The student who took five years to complete the bachelor's degree C) The student who took ten years to complete the bachelor's, master's, and Ph.D. degrees D) The student who dropped out during their first semester E) The student who dropped out after their third year
In a situation where a car salesman is selling cars on behalf of the dealer, the dealer is the
a. Principal b. Agent c. Both of the above d. None of the above
The experience of the former Soviet bloc countries illustrates that high rates of investment may fail to promote rapid economic growth when a country
a. uses central government planning rather than capital markets to allocate investment funds. b. has a strong education system. c. has secure property rights. d. has a tax system that encourages savings.