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 real risk-free interest rate and net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).
b. The real risk-free interest rate falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
c. The real risk-free interest rate rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
d. The real risk-free interest rate and net nonreserve-related international borrowing/lending remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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If the price elasticity of demand for a good is 0.8, then a
A) 1 percent rise in the price leads to a 0.8 percent decrease in the quantity demanded. B) one dollar rise in the price leads to a 0.8 percent decrease in the quantity demanded. C) 1 percent rise in the price leads to an 80 percent decrease in the quantity demanded. D) 1 percent rise in the price leads to an 8 percent decrease in the quantity demanded.
Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $50, how many hats will be produced?
A) 0 B) 1 C) 2 D) 4