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 GDP Price Index and the nominal value of the domestic currency in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium
a. The GDP Price Index rises and nominal value of the domestic currency remains the same.
b. The GDP Price Index falls and nominal value of the domestic currency remains the same.
c. The GDP Price Index and nominal value of the domestic currency remain the same.
d. The GDP Price Index rises and nominal value of the domestic currency rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.C
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Which of the following is a TRUE statement about the economic assumption of rationality?
A) Individuals who are rational necessarily ignore the interests of others. B) Individuals generally act as though they are rational. C) Individual behavior may be irrational but group behavior is always rational. D) People make decisions as if they are omniscient.
In a command socialist economy:
A) resources are government owned but individuals make some decisions over their use. B) resources are government owned and government exercises broad power over their use. C) resources are privately owned and individuals make decisions over their use. D) resources are privately owned but government exercises broad power over their use.
The main difference between European and American options is:
A. American option holders have more options than European option holders. B. European options cannot be resold. C. European option holders can exercise the option prior to expiration. D. holders of European options have more options than holders of American options.
Industries in which firms are enjoying positive profits are likely to ________ in the long run.
A. expand B. contract C. neither expand nor contract, as firms must earn an economic profit to stay in business D. expand or contract depending on the normal rate of return