Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and current international transactions in the context of the Three-Sector-Model?
a. The GDP Price Index falls, and current international transactions become more negative (or less positive).
b. The GDP Price Index rises, and current international transactions become more negative (or less positive).
c. The GDP Price Index and current international transactions remain the same.
d. The GDP Price Index rises, and current international transactions remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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a. True b. False
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Answer the following statement true (T) or false (F)
Refer to the information provided in Figure 16.1 below to answer the question(s) that follow. 
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