Assume that business investment spending rises, and the increase is funded by greater borrowing in the capital markets. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the GDP Price Index and net nonreserve international borrowing/lending balance in the context of the Three-Sector-Model?
a. The GDP Price Index rises and net
nonreserve international borrowing/lending balance becomes more positive (or less negative).
b. The GDP Price Index rises and net nonreserve international borrowing/lending balance becomes more negative (or less positive).
c. The GDP Price Index falls and net nonreserve international borrowing/lending balance becomes more positive (or less negative).
d. The GDP Price Index and net nonreserve international borrowing/lending balance remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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A current account surplus
A) poses a problem if domestic savings are being invested more profitably abroad than they would be at home. B) may pose no problem if domestic savings are being invested more profitably abroad than they would be at home. C) may pose no problem if domestic savings are being invested less profitably abroad than they would be at home. D) there is no relation between current account surplus and between savings and investment. E) poses a problem if domestic savings are being invested less profitably abroad than they would be at home.
A good would have a high price elasticity of demand if: a. there are many close substitutes for the good available in the market. b. the good is used every day by almost every household in the economy. c. the good has a low cost in proportion to most consumers' budgets
d. consumers cannot delay the purchase of this good.