Assume that the central bank increases the reserve requirement. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and current international transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and current international transactions become more negative (or less positive).
b. The real risk-free interest rate rises, and current international transactions become more negative (or less positive).
c. The real risk-free interest rate and current international transactions remain the same.
d. The real risk-free interest rate rises, and current international transactions remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
You might also like to view...
What are the four main ways in which the CPI is an upward-biased measure of the price level?
What will be an ideal response?
The structural deficit can be defined as
a. the deficit that is structurally obstructing economic recovery to reach level of high employment. b. a hypothetical construct that estimates the deficit, given current tax rates and expenditure policies, if the economy were operating at some fixed high-employment level. c. the deficit necessary to restructure the economy and reach a desired high-employment level. d. the deficit that would prevail if fiscal policy were structured differently in order to reach a desired high-employment level.
Banks that are managed in a very safe and conservative manner can be expected to earn
a. high, steady profits. b. high but volatile profits. c. low and consistent profits. d. low profits with occasional major losses.
"The United States has more oil in Alaska than there is oil in Kuwait. Therefore, the United States should stop importing oil." Evaluate this statement using economic analysis