Assume that the central bank lowers the discount to increase the nation's monetary base. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the quantity of real loanable funds per time period and the nominal value of the domestic currency in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns
to complete equilibrium.
a. The quantity of real loanable funds per time period rises and nominal value of the domestic currency remains the same.
b. The quantity of real loanable funds per time period falls and nominal value of the domestic currency remains the same.
c. The quantity of real loanable funds per time period and nominal value of the domestic currency remain the same.
d. The quantity of real loanable funds per time period rises and nominal value of the domestic currency rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.C
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