Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. 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 remain the same.
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 become more negative (or less positive).
d. There is not enough information to determine what happens to these two macroeconomic variables.
e. The GDP Price Index rises, and reserve-related (central bank) transactions remain the same.
.E
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When industrial activity increases,
A) GDP decreases because of pollution. B) pollution does not necessarily increase. C) health and life expectancy decrease. D) and real GDP increases, it is the case that in all nations fewer resources are devoted to protecting the environment. E) the increase in real GDP is partially offset by the increase in pollution.
An efficient use of resources occurs when
A) there is a deadweight loss. B) the total social benefit of a good equals its total social cost. C) there is perfect price discrimination by a monopoly. D) there is no producer surplus.