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 GDP Price Index and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The GDP Price Index falls, and reserve-related (central bank) transactions become more negative (or less positive).
b. The GDP Price Index and reserve-related (central bank) transactions remain the same.
c. The GDP Price Index falls, and reserve-related (central bank) transactions remains the same.
d. The GDP Price Index rises, and reserve-related (central bank) transactions become more positive (or less negative).
e. The GDP Price Index rises, and reserve-related (central bank) transactions remains the same.
.E
You might also like to view...
Entrepreneurs play a key role in which type of economy?
A) command economy B) centrally planned economy C) market economy D) all of the above
If the government wished to shift aggregate demand to the right, it might:
A. increase government spending. B. increase income taxes. C. pressure the Fed to decrease the money supply. D. Any of these things might cause aggregate demand to shift to the right.