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 GDP Price Index and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The GDP Price Index falls, and reserve-related (central bank) transactions become more negative (or less positive).
b. The GDP Price Index rises, and reserve-related (central bank) transactions remain the same.
c. There is not enough information to determine what happens to these two macroeconomic variables.
d. The GDP Price Index falls, and reserve-related (central bank) transactions remain the same.
e. The GDP Price Index and reserve-related (central bank) transactions remain the same.
.D
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People buy more of good 1 when the price of good 2 rises. These goods are
A) complements. B) substitutes. C) normal goods. D) inferior goods.
When interest rates rise, bond prices:
A. rise. B. could either rise or fall. C. fall. D. do not change.
If the marginal propensity to consume was 0.9, it would mean that:
A. consumers spend $1 out of every $10 of additional disposable income. B. consumers save $9 out of every $10 of additional disposable income. C. consumers spend $9 out of every $10 of additional disposable income. D. people should save more.
Which of the following individuals is responsible for developing the permanent income theory of consumption?
A) Friedman B) Modigliani C) Keynes D) Lucas