Assume that the central bank increases the reserve requirement. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and reserve-related (central bank) transactions become more positive (or less negative).
b. The real risk-free interest rate rises, and reserve-related (central bank) transactions become more negative (or less positive).
c. The real risk-free interest rate rises, and reserve-related (central bank) transactions remain the same.
d. The real risk-free interest rate and reserve-related (central bank) transactions remain the same.
e. The real risk-free interest rate falls, and reserve-related (central bank) transactions become more negative (or less positive).
.C
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Explain how the labor force participation rate, the unemployment rate, and the percentage of the labor force employed part time change in a recession
What will be an ideal response?
Specialization and trade can create more wealth (output of goods and services): a. when we only trade for things we could not produce ourselves
b. when each person specializes in what they do relatively best and trade for the rest. c. only if we gain and other countries lose. d. only with certain nations.
The Lend Me Your Ears Company monopolizes the production of a specialized hearing aid. The Lend Me Your Ears Company will find it profitable to increase the production of the hearing aids as long as marginal revenue is
A. less than marginal cost. B. greater than marginal cost. C. equal to marginal cost. D. positive.
When the output gap is positive, it represents ________ gap, and when it is negative, it represents ________ ga
A) a recessionary; an inflationary B) an inflationary; a recessionary C) an inflationary; an employment D) an employment; an unemployment E) None of the above answers is correct.