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 real GDP in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls and real GDP rises.
b. The real risk-free interest rate rises and real GDP remains the same.
c. The real risk-free interest rate and real GDP remain the same.
d. The real risk-free interest rate falls and real GDP falls.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.D
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Financial intermediaries will be more likely to loan you the savings of other individuals than an individual because
A) they have specialists who research your credit worthiness. B) they have contingency funds to cover loan losses. C) they fund credit agencies to collect loan repayment information. D) All of the above.
Total government spending (federal, state, and local) sums to approximately:
a. 10 percent of the U.S. economy. b. 20 percent of the U.S. economy. c. 40 percent of the U.S. economy. d. one-half of the U.S. economy.
Unemployment insurance and Medicaid are examples of ______.
a. the crowding-out effect b. monetary policy c. discretionary spending d. automatic stabilizers
The immigration of skilled scientists and engineers from other nations will have which of the following effects?
A. The supply curve for innovative activities will be pushed to the right, increasing the amount of innovation. B. The demand curve for innovative activities will be pushed to the left, decreasing the amount of innovation. C. The demand curve for innovative activities will be pushed to the right, increasing the amount of innovation. D. The supply curve for innovative activities will be pushed to the left, increasing the amount of innovation.