Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed 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 falls and reserve-related (central bank) transactions become more negative (or less positive).
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 falls and reserve-related (central bank) transactions remain the same.
d. The real risk-free interest rate 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
You might also like to view...
On December 17, 2010, President Obama extended income tax cuts initially enacted in 2001 and 2003 for two additional years
According to the permanent-income hypothesis, these tax cuts would represent ________ income and would have ________ on consumption. A) permanent; a significant impact B) permanent; very little impact C) transitory; a significant impact D) transitory; very little impact
Gross domestic product is
What will be an ideal response?
Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive.
If the market supply curve is given by S3, then in the long run firms will:
A. exit the market, leading the market supply curve to shift back to S1. B. exit the market, leading the market supply curve to shift back to S2. C. neither enter nor exit the market, so the market supply curve will remain at S3. D. enter the market, leading the market supply curve to shift back to S2.
Define what is meant by a positive or direct relationship between two variables and describe the line graph depicting such a relationship
Please provide the best answer for the statement.