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 quantity of real loanable funds per time period and net nonreserve international borrowing/lending balancein the context of the Three-Sector-Model? State your answer after the macroeconomic

system returns to complete equilibrium.
a. The quantity of real loanable funds per time period remains the same and net nonreserve international borrowing/lending balance becomes more negative (or less positive).
b. The quantity of real loanable funds per time period rises and net nonreserve international borrowing/lending balance becomes more negative (or less positive).
c. The quantity of real loanable funds per time period falls and net nonreserve international borrowing/lending balance becomes more positive (or less negative).
d. The quantity of real loanable funds per time period and net nonreserve international borrowing/lending balanceremain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.


.A

Economics

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