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 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...
Voucher programs for housing
A. provide rent vouchers for existing housing stock. B. are underutilized with a surplus of housing stock. C. provide down payment assistance to purchase homes. D. are known as Section 8.
In a monopolistically competitive market, entry into the industry
A) is relatively easy. B) is blocked. C) is difficult due to extensive government regulation. D) is as difficult as entry into a monopoly.
All of the following are arguments against free trade EXCEPT
A) the infant industry argument. B) dumping. C) comparative advantage. D) the need to protect American jobs.
The two ways to define poverty are which of the following?
a. relatively and absolutely b. absolutely and definitely c. definitely and conceptually d. definitely and receptively