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 GDP and the monetary base in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium
a. Real GDP rises and monetary base rises.
b. Real GDP rises and monetary base falls.
c. Real GDP and monetary base fall.
d. Real GDP 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...
What is consumer surplus? Why would policy makers be interested in consumer surplus?
What will be an ideal response?
One important consequence of migration is:
A. increased output in receiving countries. B. remittances received by sending countries. C. population growth in both countries. D. demographic shifting in both countries.
If the rightward shift of the supply curve is greater than the leftward shift of the demand curve, the equilibrium price will ______ and the equilibrium quantity will ______.
a. rise; fall b. fall; rise c. rise; rise d. fall; fall
Briefly discuss the relationship between present value and each of the following:a) future valueb) timec) interest rate
What will be an ideal response?