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 real GDP and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. There is not enough information to determine what happens to these two macroeconomic variables.
b. Real GDP rises, and nominal value of the domestic currency rises.
c. Real GDP rises, and nominal value of the domestic currency falls.
d. Real GDP falls, and nominal value of the domestic currency rises.
e. Real GDP rises, and nominal value of the domestic currency remains the same.
.C
You might also like to view...
Suppose a tax is imposed on sellers. The more inelastic the demand for the taxed item, the
A) greater the share of the tax paid by sellers. B) smaller the deadweight loss from the tax. C) larger the decrease in consumption because of the tax. D) All of the above answers are correct.
Nationwide banking might reduce bank failures due to
A) reduced competition. B) reduced lending to small businesses. C) diversification of loan portfolios across state lines. D) elimination of community banks.
If national income is $100 billion, and MPC = 0.75, then autonomous consumption is ________ and MPS is ___________
a. $25 billion; 0.25 b. $75 billion; 0.75 c. unknown; 1.25 d. unknown; 0.25 e. $75 billion; 0.25
Which of the following statements best completes the following sentence; "Prior to World War I, when the U.S. was on the gold standard, inflation in the U.S…."?
A. averaged less than one percent per year and was stable. B. averaged 3.5 percent per year and was stable. C. averaged less than one percent per year and was highly variable. D. averaged 3.5 percent per year but was highly variable.