If the people of Redland are expecting the central bank to conduct an expansionary monetary policy for several years, how will the long-run real interest rate in Redland be affected?
What will be an ideal response?
If the people of Redland expect the central bank to conduct an expansionary policy, inflationary expectations will rise. Since long-term expected real interest rate is long-term nominal interest rate less long-term expected inflation rate, the long-term expected real interest will fall as the long-term expected inflation rate rises.
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Assume that foreign capital flows from a nation increase due to political uncertainly and increased risk. 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? a. The GDP Price Index falls and current international transactions
balance becomes more positive (or less negative). 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.
The balance of payments measures a stock of transactions during a particular period, usually a year
Indicate whether the statement is true or false
The aggregate supply curve in the short run is vertical in __________ version of the AD-AS framework
A) the simple quantity theory of money B) the monetarist C) both the simple quantity theory of money and the monetarist D) neither the simple quantity theory of money nor the monetarist
Because an expansionary monetary policy decreases domestic interest rates, it can be used to fix the value of the domestic currency below the market equilibrium rate.
Answer the following statement true (T) or false (F)