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 net nonreserve international borrowing/investing and monetary base in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium
a. The net nonreserve international borrowing/lending balance becomes more positive (or less negative) and monetary base rises.
b. The net nonreserve international borrowing/lending balance becomes more negative (or less positive) and monetary base remains the same.
c. The net nonreserve international borrowing/lending balance becomes more negative (or less positive) and monetary base falls.
d. The net nonreserve international borrowing/lending balanceand monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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