Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the quantity of real loanable funds per time period and current international transactions in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period falls, and current international transactions become more negative (or less positive).
b. The quantity of real loanable funds per time period rises, and current international transactions become more negative (or less positive).
c. The quantity of real loanable funds per time period and current international transactions remain the same.
d. The quantity of real loanable funds per time period rises, and current international transactions remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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Lucas and Sargent argue that the short-run trade-off between unemployment and inflation is caused by
A) workers and firms rapidly adjusting wages and prices in response to changes in expectations. B) workers and firms using all the information available to predict inflation. C) workers and firms being fooled by unexpected changes in monetary policy. D) workers and firms using Fed policy to predict inflation.
The interest rate that describes how well a lender has done in real terms after the fact is called the
A) ex post real interest rate. B) ex ante real interest rate. C) ex post nominal interest rate. D) ex ante nominal interest rate.