Assume that foreign capital flows from a nation increase due to political uncertainly and increased risk. 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 monetary base in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls and monetary base falls
b. The real risk-free interest rate rises and monetary base falls.
c. The real risk-free interest rate and monetary base remain the same.
d. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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A change in the amount saved due to a change in income is represented by a
A. shift of the entire saving schedule. B. movement along the saving schedule. C. change in the marginal propensity to consume. D. change in the marginal propensity to save.
Which of the following would lead to an upward movement along the aggregate demand curve?
a. An increase in government purchases b. An increase in the money supply c. An increase in the price level d. A decrease in the money supply e. An increase in taxes
Gross domestic product measured in terms of the prices of a fixed, or base, year is
A. current GDP. B. nominal GDP. C. base GDP. D. real GDP.
In the fooling model, AD/SAS equilibria to the right of LAS are unstable because ________ nominal wages shift ________
A) falling, AD downward B) falling, SAS downward C) rising, AD upward D) rising, SAS upward