Assume that the central bank increases the reserve requirement. 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 the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period rises, and nominal value of the domestic currency falls.
b. The quantity of real loanable funds per time period falls, and nominal value of the domestic currency rises.
c. The quantity of real loanable funds per time period rises, and nominal value of the domestic currency remains the same.
d. The quantity of real loanable funds per time period rises, and nominal value of the domestic currency rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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The relationship that says that the forward premium or discount is equal to the interest differential is
A) interest rate parity. B) purchasing power parity. C) the Fisher equation. D) the term structure of interest rates.
The primary purpose of deposit insurance is to
A) improve the flow of information to investors. B) prevent banking panics. C) protect bank shareholders against losses. D) protect bank employees from unemployment.
According to the simple circular flow concept, whenever planned investment is less than planned saving
a. inventories accumulate. b. output increases. c. prices rise. d. employment increases.
Paul Bergen and Virginia Clancy each own a 100-acre soybean farm in Soyburg, Illinois. Together they grow 1/1000th of 1 percent of the nation's soybeans. When they merge, it will:
a. b and e. b. be a horizontal merger. c. reduce competition in the soy market. d. increase the market power of Paul and Virginia. e. probably go unnoticed outside of Soyburg.