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 real risk-free interest rate and net nonreserve international borrowing/lending balancein the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to
complete equilibrium.
a. The real risk-free interest rate rises and net nonreserve international borrowing/lending balance becomes more positive (or less negative).
b. The real risk-free interest rate remains the same and net nonreserve international borrowing/lending balance becomes more negative (or less positive).
c. The real risk-free interest rate rises and net nonreserve international borrowing/lending balance becomes more negative (or less positive).
d. The real risk-free interest rate and net nonreserve international borrowing/lending balanceremain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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The real balances effect occurs because a higher price level will reduce the real value of people's:
a. financial assets. b. wages. c. unpaid debt. d. physical investments.
A government budget deficit will lead to:
a. an increase in the supply of loanable funds and an increase in real interest rates. b. a decrease in the supply of loanable funds and an increase in real interest rates. c. an increase in the supply of loanable funds and a decrease in real interest rates. d. a decrease in the supply of loanable funds and a decrease in real interest rates.
The concept of rational expectations first appeared on the economic scene in _______, but it wasn't until the _____________ that it received more significant notice in the economics profession
A) 1931; early 1970s B) 1961; early 1970s C) 1981; early 1990s D) 1991; early 2000s E) 1921; early 1980s
The policy in which industrial production is oriented towards foreign consumers is called
A. import substitution. B. export orientation. C. import promotion. D. export promotion.