Assume that the central bank sells government securities in the open market. 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? State your answer after the macroeconomic system returns to complete equilibrium
a. The real risk-free interest rate rises and monetary base rises.
b. The real risk-free interest rate falls and monetary base falls.
c. The real risk-free interest rate rises and monetary base falls.
d. The real risk-free interest rate and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.D
You might also like to view...
The value of resources devoted to rent seeking will
A) at most equal the monopoly's economic profit. B) reduce deadweight loss. C) reduce consumer surplus. D) raise output to an efficient level.
The economic role of the legal system might best be described as
A) promoting the productive efficiency of competitive markets. B) identifying and producing public goods. C) establishing the "rules of the game" and acting as a referee when disputes arise among market participants. D) identifying and producing merit goods.
Cost-push inflation is due to:
a. labor cost increases. b. energy cost increases. c. raw material cost increases. d. all of these.
Consider the following payoff matrix facing Harry and Sally when each chooses to go to the coffee shop listed. Both Harry and Sally would like to meet each other but are shy about asking the other out on a date. Harry StarbucksDunkin DonutsSally StarbucksH: 1, S: 1H: 0, S: 0 Dunkin DonutsH: 0, S: 0H: 1, S: 1What is Harry's best strategy?
A. Harry has no best strategy. B. Stay at home. C. Go to Starbucks. D. Go to Dunkin' Donuts.