Assume that the central bank increases the reserve requirement. If the nation has highly mobile international capital markets and a flexible 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?
a. The GDP Price Index falls, and nominal value of the domestic currency falls.
b. The GDP Price Index falls, and nominal value of the domestic currency remains the same.
c. There is not enough information to determine what happens to these two macroeconomic variables.
d. The GDP Price Index rises, and nominal value of the domestic currency rises.
e. The GDP Price Index falls, and nominal value of the domestic currency rises.
.E
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Political stability is not a prerequisite to economic growth
Indicate whether the statement is true or false
Suppose it takes roughly two years for monetary policy to have a significant impact on inflation
If inflation is currently low but policymakers believe inflation will rise over the next two years with an unchanged stance of monetary policy, when should they tighten monetary policy to prevent the inflationary surge? A) now B) wait until overt signs of inflation appear C) next year D) two years later
Given that meat and potatoes are complementary goods, if the price of meat decreases substantially, there would be:
A) an increase in the demand for potatoes. B) an increase in the quantity of potatoes demanded. C) a decrease in the demand for potatoes. D) no change in the demand for potatoes.
Refer to the information provided in Figure 25.1 below to answer the question(s) that follow.
Figure 25.1Refer to Figure 25.1. A movement from Point A to Point D can be caused by
A. a decrease in nominal income. B. an increase in nominal income. C. an increase in the interest rate. D. a decrease in the interest rate.