Assume that business investment spending rises, and the increase is funded by greater borrowing in the capital markets. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the real GDP and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. Real GDP rises and nominal value of the domestic currency
falls.
b. Real GDP falls and nominal value of the domestic currency remains the same.
c. Real GDP rises and nominal value of the domestic currency remains the same.
d. Real GDP 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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Stability of the U.S. economy between 1985 and 2007 referred to as
A) Great Moderation. B) the Great Depression. C) Automatic Stabilizer. D) Fiscal Discretion.
The demand for an input used in a fixed proportions technology
A) is identical to the demand for the other inputs. B) is greater than the demand for the end product itself. C) lies below the demand for the end product itself. D) is the same as the demand for the end product itself.