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 quantity of real loanable funds per time period and reserve-related (central bank) transactions in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns
to complete equilibrium.
a. The quantity of real loanable funds per time period remains the same and reserve-related (central bank) transactions become more positive (or less negative).
b. The quantity of real loanable funds per time period falls and reserve-related (central bank) transactions remain the same.
c. The quantity of real loanable funds per time period and reserve-related (central bank) transactions remain the same.
d. The quantity of real loanable funds per time period rises and reserve-related (central bank) transactions remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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