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 real GDP and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. Real GDP falls, and reserve-related (central bank) transactions become more negative (or less positive).
b. Real GDP falls and reserve-related (central bank) transactions remain the same.
c. Real GDP and reserve-related (central bank) transactions remain the same.
d. Real GDP rises, and reserve-related (central bank) transactions remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.D
You might also like to view...
Jones is hungry, but is willing to postpone lunch as long as he can have a much larger meal at dinner. The compensation of the larger meal at dinner time suggests that Jones
A) is a glutton. B) acts irrationally because it is best to have three meals a day. C) has a positive rate of time preference with regard to today's meals. D) does not consider lunch to be a scarce good.
Refer to Figure 15-10. What is the area that represents producer surplus under a monopoly?
A) the triangle 0P3H B) the rectangle P1P3HF C) the trapezium 0P1FH D) the triangle 0P2E
What effect will expansionary fiscal policy have on the economy, according to new classical economists?
According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had
a. increased, so it would increase production. b. increased, so it would decrease production. c. decreased, so it would increase production. d. decreased, so it would decrease production.