Assume that the central bank purchases government securities in the open market. 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 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 remain the same.
b. The real risk-free interest rate falls, and reserve-related (central bank) transactions become more negative (or less positive).
c. The real risk-free interest rate rises, and reserve-related (central bank) transactions remain the same.
d. There is not enough information to determine what happens to these two macroeconomic variables.
e. The real risk-free interest rate rises, and reserve-related (central bank) transactions become more positive (or less negative).
.A
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A) Figure A B) Figure B C) Figure C D) Figure D E) None of the figures represent this change.
The ultimate objective of macroeconomics is to: a. reduce the unemployment rate in an economy
b. stabilize the growth rate in an economy. c. develop and test theories about how the overall economy works. d. improve the international competitiveness of U.S. financial markets. e. maximize the efficiency of government intervention in the marketplace.
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A. smaller; smaller B. smaller; greater C. greater; smaller D. greater; greater
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