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 GDP Price Index and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The GDP Price Index
rises and nominal value of the domestic currency remains the same.
b. The GDP Price Index falls and nominal value of the domestic currency remains the same.
c. The GDP Price Index and nominal value of the domestic currency remain the same.
d. The GDP Price Index falls and nominal value of the domestic currency falls.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
You might also like to view...
Suppose that the government increases a tax paid by employers for hiring workers (for example, Social Security). What are the likely effects on real wages, output and employment? What are the likely magnitudes of these effects?
What will be an ideal response?
What is the social interest theory of regulation? How does it differ from the capture theory of regulation?
What will be an ideal response?
The law of increasing costs is based on each of the following, except
A. the law of scarcity. B. the law of diminishing returns. C. diseconomies of scale. D. factor suitability.
A distinguishing feature of a public good is that it:
A. is not possible to exclude people who don't pay for the public good. B. is possible to exclude people who pay for the public good. C. may have external costs. D. is provided by the government.