Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the quantity of real loanable funds per time period and real GDP in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period falls, and real GDP falls.
b. The quantity of real loanable funds per time period falls, and real GDP rises.
c. The quantity of real loanable funds per time period rises, and real GDP remains the same.
d. The quantity of real loanable funds per time period and real GDP remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
You might also like to view...
When the selling price of a good goes up, what is the relationship to the quantity supplied?
a) the cost of production goes down b) The profit made on each item goes down c) It becomes practical to produce more goods d) There is no relationship between the two
Stabilization policy often faces a trade-off between inflation and unemployment.
Answer the following statement true (T) or false (F)