Assume that business investment spending rises, and the increase is funded by greater borrowing in the capital markets. If the nation has low mobility 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?
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 remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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George believes that the inflation in this year will be around 9% because it was around 9% in the previous year. George can be said to have:
A) rational expectations. B) marginal expectations. C) adaptive expectations. D) composite expectations.
When a bank receives $100,000 in new deposits, the amount of loans the bank can make is limited by
A) the Treasury Department. B) federal law. C) its desired reserve ratio. D) the annual federal budget. E) state law, with banks in different states being able to make different amounts of loans.
In the above figure, if the minimum wage is set at $8 per hour, the level of unemployment is ________ hours per week is
A) 40 million B) 30 million C) 20 million D) 0
As an example of hyperinflation, one U.S. dollar was equal to _________ German marks in 1923, compared to 8.9 marks in 1919.
A. 1 trillion B. 1,000 C. 0.001 D. 1