Assume that business investment spending rises, and the increase is funded by greater borrowing in the capital markets. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the nominal exchange rate and monetary base in the context of the Three-Sector-Model?
a. The nominal exchange rate rises and monetary base rises
b. The nominal exchange rate remains the same and monetary base falls.
c. The nominal exchange rate remains the same and monetary base rises.
d. The nominal exchange rate and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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A) 10. B) 1/5. C) 2. D) 8. E) 5.
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A) G and E B) H and G plus E and D C) H and G minus E and D D) G and F plus F and E E) none of the above
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a. True b. False Indicate whether the statement is true or false