Assume that the central bank lowers the discount to increase the nation's monetary base. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real GDP and net nonreserve-related borrowing/investing in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium
a. Real GDP remains the same and net nonreserve-related borrowing/investing becomes more negative (or less positive).
b. Real GDP rises and net nonreserve-related borrowing/investing becomes more negative (or less positive).
c. Real GDP falls and net nonreserve-related borrowing/investing becomes more positive (or less negative).
d. Real GDP and net nonreserve-related borrowing/investing 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...
An expansion ends when the economy hits a trough and then enters a recession
Indicate whether the statement is true or false
Warren always carries a one hundred dollar bill in case of emergencies. This is an example of the
A) precautionary demand for money. B) asset demand for money. C) transactions demand for money. D) wealth demand for money.