Assume that foreign capital flows into a nation rise due to expected increases in stock market appreciation. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real GDP and current international transactions balance in the context of the Three-Sector-Model?
a. Real GDP falls and current international transactions balance becomes
more negative (or less positive).
b. Real GDP rises and current international transactions balance becomes more negative (or less positive).
c. Real GDP and current international transactions balance remain the same.
d. Real GDP rises and current international transactions balance remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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The graph shows the labor market for painters. The lower the wage rate, the ________ is the quantity of painters that firms demand and the ________ is the quantity of painters that households are willing to supply
A) greater; smaller B) greater; greater C) smaller; greater D) smaller; smaller E) None of the above answers is correct because both the demand and supply curves will shift in response to the change in the wage rate.
Most economists agree that it is possible for fiscal policy to fine-tune the economy.
Answer the following statement true (T) or false (F)
The term externalities refers to
A. The negative costs and positive benefits of a market activity borne by a third party. B. Only negative costs of a market activity borne by a third party. C. Only positive benefits of a market activity borne by a third party. D. None of the choices are correct.
If central banks were no longer obliged to intervene in currency markets to fix exchange rates, governments would be able to use monetary policy to reach
A) internal balance. B) external balance. C) internal and external balance. D) internal but not external balance. E) external but not internal balance.