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 quantity of real loanable funds per time period and GDP Price Index in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period rises, and GDP Price Index falls.
b. The quantity of real loanable funds per time period falls, and GDP Price Index remains the same.
c. There is not enough information to determine what happens to these two macroeconomic variables.
d. The quantity of real loanable funds per time period falls, and GDP Price Index rises.
e. The quantity of real loanable funds per time period falls, and GDP Price Index falls.
.E
You might also like to view...
International factor flows tend to lower incomes of those factors in host countries that most directly substitute for that factor, and to raise the incomes of other factors
Indicate whether the statement is true or false
Policies that restrict supply could generate an increase in social welfare because the increase in producer surplus could exceed the decrease in consumer surplus
Indicate whether the statement is true or false