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 real risk-free interest rate and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises and nominal
value of the domestic currency falls.
b. The real risk-free interest rate falls and nominal value of the domestic currency remains the same.
c. The real risk-free interest rate rises and nominal value of the domestic currency remains the same.
d. The real risk-free interest rate rises and nominal value of the domestic currency rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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Velocity is V, the quantity of money is M, the price level is P, and real GDP is Y. Which of the following formulas is correct?
A) Y = (P × M) ÷ V B) Y = V × M C) Y = (P + M) - V D) V = (P + Y) × M E) V = (P × Y) ÷ M
The term autarky refers to
a. equilibrium after trade begins between two countries b. the gains received from trade c. self-sufficiency d. political isolationism e. the recognition that mutually beneficial trade is not possible between two countries