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 quantity of real loanable funds per time period and reserves account in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period falls and
reserves account becomes more positive (or less negative).
b. The quantity of real loanable funds per time period falls and reserves account remains the same.
c. The quantity of real loanable funds per time period and reserves account remain the same.
d. The quantity of real loanable funds per time period rises and reserves account remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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According to the crowding-out effect, a budget deficit will lead to:
a. reduced investment spending and a reduction in long-term economic growth. b. reduced investment spending and an increase in long-term economic growth. c. increased investment spending and a reduction in long-term economic growth. d. increased investment spending and an increase in long-term economic growth.
The ability of an individual to own and exercise control over scarce resources is called
a. market failure. b. property rights. c. externality. d. market power.
If the interest rates rise, the present values of future dollars will _______.
Fill in the blank(s) with the appropriate word(s).
A decrease in the supply of dollars and a decrease in the demand for Indian rupees
A. decreases the rupee price of dollars. B. does not change the exchange rate between dollars and rupees. C. increases the dollar price of rupee. D. decreases the dollar price of rupee.