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 real GDP and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. Real GDP falls and nominal
value of the domestic currency remains the same.
b. Real GDP and nominal value of the domestic currency remain the same.
c. Real GDP falls and nominal value of the domestic currency rises.
d. Real GDP falls and nominal value of the domestic currency falls.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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Real GDP in a given year is
A) GDP valued in the prices of the base year. B) GDP valued in the prices of that year. C) always less than nominal GDP for the same year. D) GDP adjusted for the value of intermediate goods.
Monetarists are in favor of
a. inflation targeting. b. interest rate targeting. c. output targeting. d. nominal income targeting. e. money growth targeting.
A fall in the demand for U.S. exports would result in a rise in the exchange rate when
a. there is no capital mobility and exchange rates are allowed to float. b. there is capital mobility. c. exchange rates are allowed to float. d. the country has a balance of payments surplus. e. both c and d.
Basil is maximizing his utility from consuming tea and crumpets. If the marginal utility of his last cup of tea was 24 units of utility and that of his last crumpet was 6 units of utility, which of the following is true?
a. The price of tea is six times the price of crumpets. b. The price of crumpets is four times the price of tea. c. The prices of tea and crumpets are equal. d. The price of tea is four times the price of crumpets. e. The MU of the next cup of tea is less than the MU of the next crumpet.