Assume that foreign capital flows into a nation rise due to expected increases in stock market appreciation. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the GDP Price Index and current international transactions balance in the context of the Three-Sector-Model?
a. The GDP Price Index falls and current international transactions
balance becomes more negative (or less positive).
b. The GDP Price Index rises and current international transactions balance becomes more negative (or less positive).
c. The GDP Price Index and current international transactions balance remain the same.
d. The GDP Price Index rises and current international transactions balance remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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With price sensitivity in mind, who would you expect to be more likely to purchase food at the movie concession counter?Click to view larger image.
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