Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the GDP Price Index and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The GDP Price Index
rises and nominal value of the domestic currency remains the same.
b. The GDP Price Index falls and nominal value of the domestic currency remains the same.
c. The GDP Price Index and nominal value of the domestic currency remain the same.
d. The GDP Price Index falls and nominal value of the domestic currency falls.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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If real GDP is increasing more rapidly than population:
a. population must be declining. b. the country will have to export more than it imports. c. the general level of prices must be increasing. d. per capita real GDP will be increasing.
What assumption(s) is (are) necessary to generate a kinked demand curve?
a. all firms in the industry ignore the price changes made by any one firm b. any price decrease will be ignored but price increases will be followed c. all firms will follow a price decrease but will ignore any price increase d. all price changes made by any firm will be followed by all of the other firms e. price can increase, but not decrease