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 real GDP and current international transactions in the context of the Three-Sector-Model?

a. Real GDP falls, and current international transactions become more negative (or less positive).
b. Real GDP rises, and current international transactions become more negative (or less positive).
c. Real GDP and current international transactions remain the same.
d. Real GDP rises, and current international transactions remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.


.A

Economics

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