Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. 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 the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and nominal value of the domestic currency falls.
b. The real risk-free interest rate rises, and nominal value of the domestic currency remains the same.
c. There is not enough information to determine what happens to these two macroeconomic variables.
d. The real risk-free interest rate rises, and nominal value of the domestic currency rises.
e. The real risk-free interest rate falls, and nominal value of the domestic currency falls.
.D
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Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates the
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A hike in the federal funds rate results in ________ in the real interest rate which leads to a ________ in investment
A) an increase; a decrease B) a decrease; a decrease C) a decrease; an increase D) a decrease; no change E) an increase; an increase
Majority rule will produce the outcome most preferred by the median voter
a. True b. False Indicate whether the statement is true or false
Using proper economic terminology, describe why Mexican restaurants often provide chips and salsa for free to their customers