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 nominal exchange rate and the monetary base in the context of the Three-Sector-Model?
a. The nominal exchange rate remains the
same and monetary base rises.
b. The nominal exchange rate falls and monetary base falls.
c. The nominal exchange rate remains the same and monetary base falls.
d. The nominal exchange rate and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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A foreign firm that is selling below cost and is accused of dumping often:
a. lowers its price further to increase the tariff imposed. b. moves its production to the importing nation to avoid the tariff completely. c. raises its export prices to reap the rents and avoid the antidumping tariff completely. d. calls for a ruling by the WTO.
According to the interest rate effect, as the price level increases, households and firms' holdings of money ____, interest rates ____, investments ____, and the quantity RGDP demanded ____
a. increases, decrease, increase, decreases b. increases, increase, increase, decreases c. decreases, decrease, decrease, increases d. increases, increase, decrease, decreases