Assume that foreign capital flows into a nation rise due to expected increases in stock market appreciation. 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?
a. The real risk-free interest rate falls and monetary base falls
b. The real risk-free interest rate rises and monetary base falls.
c. The real risk-free interest rate and monetary base remain the same.
d. The real risk-free interest rate falls and monetary base rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.D
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Suppose the corn-producing industry of the U.S. is a price taker in the world market and government puts a ban on imports. The corn industry also receives subsidy from the home government. Then
A) social welfare will increase if the ban on imports is removed. B) everyone will be better off if both ban on imports and subsidy are removed. C) social efficiency will be improved if both ban on imports and subsidy are removed. D) the deadweight loss is reduced if subsidy is removed.
Although a monopoly can charge any price it wishes, it chooses:
a. the highest price. b. price equal to marginal cost. c. the price that maximizes profit. d. competitive prices. e. a fair price.
When we move along a given demand curve,
a. only price is held constant.
b. income and price are held constant.
c. all nonprice determinants of demand are held constant.
d. all determinants of quantity demanded are held constant.
Which system is the least difficult to maintain if you are running a trade deficit?
A. The free market exchange rate system B. The floating exchange rate system C. The fixed exchange rate system D. The managed float exchange rate system