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 GDP and current international transactions balance in the context of the Three-Sector-Model?
a. Real GDP falls and current
international transactions balance becomes more negative (or less positive).
b. Real GDP rises and current international transactions balance becomes more negative (or less positive).
c. Real GDP falls and current international transactions balance becomes more positive (or less negative).
d. Real GDP rises and current international transactions balance remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.C
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If the nominal interest rate is 0% and the real interest rate is 2%, what is the inflation rate?
A) -2% B) 2% C) -4% D) 0%
The short-run shutdown price occurs where price equals
A) MC. B) AVC at any point. C) AVC at the minimum point. D) AFC at the minimum point.
An increase in income causes the demand of normal goods to _________ and the price of normal goods to
a. Increase; increase b. Increase; decrease c. Decrease; increase d. Decrease, decrease
The real balances effect is caused by an inverse relationship between the price level and the real value of financial assets with fixed nominal value
a. True b. False Indicate whether the statement is true or false