Assume that the central bank lowers the discount to increase the nation's monetary base. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the GDP Price Index and reserve-related (central bank) transactions in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium
a. The GDP Price Index remains the same and reserve-related (central bank) transactions become more positive (or less negative).
b. The GDP Price Index falls and reserve-related (central bank) transactions remain the same.
c. The GDP Price Index and reserve-related (central bank) transactions remain the same.
d. The GDP Price Index rises and reserve-related (central bank) transactions remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
You might also like to view...
Fiscal policy has a greater impact in a closed economy than it does in an open economy
Indicate whether the statement is true or false
When measuring economic growth, economists typically focus on per capita real GDP in order to account for variations in the:
a. size of the population b. price level c. quality of goods and services d. both (a) and (b) above
What is the first round effect on the components of aggregate demand, if the government increases spending (assume fixed exchange rates and financing through the real credit market)?
a. Aggregate demand increases and net exports decrease. b. Aggregate demand and net exports do not change c. Aggregate demand decreases and net exports increases. d. Aggregate demand and net exports increase. e. Aggregate demand and net exports decrease.
Which of the following characteristics would describe a product with an elastic demand?
A. The good has many different uses and many substitutes for the product exist. B. The good has relatively few uses and few substitutes for the product exist. C. The good is considered a luxury and few substitutes for the product exist. D. The good has many different uses and the price of the product is low relative to the buyer's income.