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 quantity of real loanable funds per time period and monetary base in the context of the Three-Sector-Model?

a. The quantity of real loanable funds rises and monetary base rises.
b. The quantity of real loanable funds rises and monetary base falls.
c. The quantity of real loanable funds and monetary base fall.
d. The quantity of real loanable funds and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.


.B

Economics

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Economics