Assume that the central bank increases the reserve requirement. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and GDP Price Index rises.
b. The real risk-free interest rate falls, and GDP Price Index falls.
c. The real risk-free interest rate rises, and GDP Price Index falls.
d. The real risk-free interest rate and GDP Price Index remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.C
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If the interest rate is 10 percent, the present value of $400 to be received two years from today is about
A) $331. B) $484. C) $364. D) $440.
Suppose that today, consumers expect the price of a gallon of gasoline to double in the future. Then today the gasoline
A) demand curve will shift to the right. B) demand curve will shift to the left. C) supply curve will shift to the right. D) supply curve will shift to the left.
The economic return to oil resources is called:
a. Rent. b. Wages. c. Profits. d. Interest. e. None of the above.
Over a year, a nation's GDP at current prices rose by 15 percent while the price index increased from 100 to 110. GDP at constant prices rose by about:
A. 3 percent B. 5 percent C. 7 percent D. 9 percent