In an open economy with a given level of real interest rates and risk, an increase in real interest rates abroad will ________ capital inflows and ________ the equilibrium domestic real interest rate.
A. increase; decrease
B. increase; increase
C. decrease; increase
D. decrease; decrease
Answer: C
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A tax is said to be progressive if
a. the absolute size of the tax (in dollars) increases as income increases b. the wealthy pay a smaller percentage of their income than the poor c. the average tax rate falls as income rises d. the proportion of income paid as taxes increases as income increases e. the proceeds are used to pay for liberal political programs
Because the Fed increased the money supply after the recession in the early 1990s, the
a. AD curve shifted to the left b. economy returned to equilibrium GDP at a price level that was lower than the original price level c. price level continued to increase after the recession ended d. price level fell back to its original level e. long-run equilibrium GDP decreased
Oligopolies would like to act like a
a. duopoly, but self-interest often drives them closer to the perfectly competitive outcome. b. competitive firm, but self-interest often drives them closer to the duopoly outcome. c. monopoly, but self-interest often drives them to charge a higher price than would be charged by a monopoly. d. monopoly, but self-interest often drives them closer to the perfectly competitive outcome.
Which one of the following statements is TRUE?
A. The Keynesian model cannot explain periods of prolonged unemployment. B. The classical model cannot explain periods of prolonged unemployment. C. The Keynesian model assumes complete flexibility of wages and prices. D. The Keynesian model shows that the level of real GDP is supply-determined.