Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the GDP price index and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The GDP Price Index rises, and nominal value of the domestic currency falls.
b. The GDP Price Index falls, and nominal value of the domestic currency rises.
c. The GDP Price Index falls, and nominal value of the domestic currency falls.
d. There is not enough information to determine what happens to these two macroeconomic variables.
e. The GDP Price Index rises, and nominal value of the domestic currency remains the same.
.C
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If the AD curve shifts to the left as a result of a decrease in the money supply growth rate:
A. the economy will temporarily depart from its long-run inflation rate. B. the economy will permanently depart from its long-run growth rate. C. the economy will temporarily depart from its long-run growth rate. D. the economy will adjust immediately and never depart from its long-run growth rate.
Consider a diagram in which the variable measured on the y-axis remains constant while the variable measured on the x-axis increases. The graph is of this relationship is a
A) perpendicular line. B) line with slope equal to zero. C) line that has positive slope. D) line that has a negative slope.