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 nominal exchange rate and monetary base in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium
a. The nominal exchange rate rises and monetary base rises.
b. The nominal exchange rate rises and monetary base falls.
c. The nominal exchange rate and monetary base fall.
d. The nominal exchange rate and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.D
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Monopolistic competition is characterized by excess capacity because
A. firms charge a price that is greater than marginal cost. B. firms produce at an output level less than the least-cost output. C. firms are always profitable in the long run. D. the demand for a product is perfectly elastic in this type of industry.
A temporary supply shock, such as a bumper crop, would
A) shift the FE line to the right and leave the IS curve unchanged. B) shift the FE line to the left and shift the IS curve up and to the right. C) shift the FE line to the left and leave the IS curve unchanged. D) have no effect on the FE line.
In comparing the changes in actual budget surplus and the structural surplus between 1993 and 1999, it is clear that the
a. actual surplus rose less than the structural surplus. b. actual surplus and the structural surplus rose about the same. c. actual surplus rose much more than the structural surplus. d. tax increases of 1993 decreased the structural surplus more than they decreased the actual surplus.
Suppose an ardent environmentalist sought to preserve limited natural resources for future generations. She would more than likely be arguing that oil and gas companies use an inappropriately
A. decreasing discount rate when considering optimal resource use. B. flat discount rate when considering optimal resource use. C. high discount rate when considering optimal resource use. D. low discount rate when considering optimal resource use.