Assume that the central bank purchases government securities in the open market. If the nation has low mobility 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. Real GDP rises, and nominal value of the domestic currency falls.
b. Real GDP falls, and nominal value of the domestic currency rises.
c. Real GDP rises, and the nominal value of the domestic currency remains the same.
d. Real GDP rises, and nominal value of the domestic currency rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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A bank that has no excess reserves
A) cannot create loans. B) is not in equilibrium. C) is on the brink of bankruptcy. D) has no required reserves.
Suppose a competitive firm is paying a wage of $12 an hour. Assume that labor is the only input. If hiring another worker would increase output by four units per hour, then to maximize profits the firm should
A) layoff some workers. B) not change the number of workers it currently hires. C) hire the extra worker. D) There is not enough information to answer the question.