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 real GDP and net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?
a. Real GDP falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
b. Real GDP rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
c. Real GDP falls, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).
d. Real GDP 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.
.C
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Explain the difference between the following two expressions: Y = C(Yd) + I + G + CA(EP /P, Yd) and Y = C + I +G + CA
What will be an ideal response?
An upward-sloping supply curve shows that: a. buyers are willing to pay more for particularly scarce products
b. suppliers expand production as the product price falls. c. suppliers are willing to increase production of their goods if they receive higher prices for them. d. buyers are willing to buy more as the product price falls. e. buyers are not affected either directly or indirectly by the sellers' costs of production.