A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7 . Assume that the economy is initially in equilibrium. What is the spending multiplier of this economy?

If the quantity of housing supplied in a community is less than the quantity of houses demanded, the existing price:

A) will remain unchanged. B) will fall to clear the market. C) will either fall or remain unchanged. D) is below the market equilibrium price.

Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and the monetary base in the context of the Three-Sector-Model?

a. The real risk-free interest rate falls and monetary base falls. b. The real risk-free interest rate rises and monetary base falls. c. The real risk-free interest rate falls and monetary base rises. d. The real risk-free interest rate and monetary base remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.