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 quantity of real loanable funds per time period and real GDP in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period falls and real
GDP falls.
b. The quantity of real loanable funds per time period rises and real GDP rises.
c. The quantity of real loanable funds per time period rises and real GDP remains the same.
d. The quantity of real loanable funds per time period and real GDP remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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Answer the following statement true (T) or false (F)
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