Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has low mobility international capital markets and a flexible 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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Refer to Figure 14.3. To maximize total wages paid to workers, the labor union will agree to wage rate:
A) W0. B) W1. C) W2. D) W3. E) none of the above
Which of the following people are liquidity providers?
A. Used car salesman B. Stock broker C. Real estate agent D. All of these are considered liquidity providers.
How does the concept of elasticity allow us to improve upon our understanding of supply and demand?
a. Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept. b. Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus. c. Without elasticity, we would not be able to address the direction in which price is likely to move in response to a shortage. d. Without elasticity, it is very difficult to assess the degree of competition within a market.
How has the pattern of fluctuations in overall U.S. business activity changed since World War II?
A. Expansions have been eliminated. B. Contractions have been eliminated. C. Recessions have been eliminated. D. It has become less volatile.