Assume that the central bank sells government securities in the open market. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium
a. The real risk-free interest rate rises and GDP Price Index rises.
b. The real risk-free interest rate falls and GDP Price Index falls.
c. The real risk-free interest rate rises and GDP Price Index falls.
d. The real risk-free interest rate and GDP Price Index remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.D
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In the United States, periods of deflation
A) primarily occurred during times of war. B) were virtually nonexistent until after 1980. C) only occurred before the Civil War. D) were relatively common prior to 1930.
Use the above figure. When it maximizes its economic profits, the monopolistically competitive firm depicted in the figure
A) is earning an economic profit. B) is earning an accounting profit. C) is earning an economic loss. D) must increase output to reduce the ATC.