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 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 rises and monetary base rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
You might also like to view...
In the above figure, a price of $15 per dozen for roses would result in
A) equilibrium. B) a shortage. C) a surplus. D) downward pressure on prices.
In the coordination failure model, the most likely explanation of business cycles are
A) money supply shocks. B) government spending shocks. C) total factor productivity shocks. D) fluctuations between "good" and "bad" equilibria.
If a perfectly competitive firm raises its price,
a. the quantity demanded of its good falls because the firm faces a downward- sloping demand curve b. the quantity demanded of its good falls to zero c. new firms will enter, attracted by the higher price d. it loses some of its market share e. other firms in the industry must follow the leader
Savings bonds differ from most other bonds in that-
What will be an ideal response?