Assume that the central bank purchases government securities in the open market. If the nation has low mobility international capital markets and a flexible 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 falls, and nominal value of the domestic currency rises.
b. The real risk-free interest rate falls, and nominal value of the domestic currency falls.
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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Refer to the above figure. Which of the following would allow society to move to point d?
A) producing efficiently B) concentrating production in wheat C) increasing the quantity of labor D) using the best land to produce wheat and the lower quality land to produce beans
Since the mid-1980s, the debt-to-income ratio of American households
a. has remained about the same as the previous 25 years. b. has been slowly declining. c. has fluctuated between about 55 and 70 percent of after-tax income. d. has rapidly increased.