Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. 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 current international transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and current international transactions become more negative (or less positive).
b. The real risk-free interest rate rises, and current international transactions become more negative (or less positive).
c. The real risk-free interest rate and current international transactions remain the same.
d. The real risk-free interest rate rises, and current international transactions remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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Since countries differ in the amount of economic activity that is transacted in organized markets,
a. some countries are more productive than others. b. persons live better in some countries than others. c. international comparisons of per capita GDP are often misleading. d. comparisons between countries are totally impossible.
In the long run,
a. both monopolists and perfectly competitive firms produce at minimum long-run average total cost. b. a monopolist will exit the industry if he is earning zero economic profit. c. a monopolist will always charge a higher price than he charges in the short run. d. consumer surplus is smaller if an industry is a monopoly than if it is perfectly competitive.