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 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 falls.
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 rises, and GDP Price Index rises.
e. The quantity of real loanable funds per time period and GDP Price Index remain the same.
.D
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A phase in the business cycle in which the economy's real GDP declines is known as:
a. a depression. b. a recession. c. a downtick. d. disequilibrium. e. limited demand.
The demand curve illustrates the fact that consumers tend to purchase:
A. more of a good as their incomes rise. B. more of a good as its price falls. C. name-brand products more frequently than generic products. D. more of a good as it becomes more popular.