Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the quantity of real loanable funds per time period and reserve-related (central bank) transactions in the context of the
Three-Sector-Model?
a. The quantity of real loanable funds per time period falls, and reserve-related (central bank) transactions become more negative (or less positive).
b. The quantity of real loanable funds per time period falls, and reserve-related (central bank) transactions remain the same.
c. The quantity of real loanable funds per time period and reserve-related (central bank) transactions remain the same.
d. The quantity of real loanable funds per time period 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.
.B
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a. True b. False
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