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 GDP Price Index and current international transactions balance in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium
a. The GDP Price Index falls and current international transactions balance becomes more negative (or less positive).
b. The GDP Price Index rises and current international transactions balance becomes more negative (or less positive).
c. The GDP Price Index and current international transactions balance remain the same.
d. The GDP Price Index rises and current international transactions balance remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.C
You might also like to view...
If firms in a competitive industry independently operate to maximize profits, the ________ are eventually equalized across the firms
A) total costs B) marginal costs C) profits D) revenues
Keynesian theory emphasizes
A) aggregate supply. B) rational expectations. C) short-run analysis. D) Say's Law.
A government policy that is consistent with real business cycle theory would be for
A) government to vary its spending in response to shocks to total factor productivity. B) the monetary authority to expand and contract the nominal money supply in response to shocks to total factor productivity. C) government to smooth out tax distortions over time. D) government to vary its lump-sum tax collections in response to changes in total factor productivity.
If MPPa/Pa > MPPb/Pb, then the proportions of these two inputs is optimal
a. True b. False Indicate whether the statement is true or false