Assume that foreign capital flows into a nation rise due to expected increases in stock market appreciation. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real GDP and monetary base in the context of the Three-Sector-Model?
a. Real GDP rises and monetary base rises
b. Real GDP rises and monetary base falls.
c. Real GDP and monetary base fall.
d. Real GDP and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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According to the new classical macroeconomists, each of the following statements is true EXCEPT:
A) Disinflation will be harder to bring about because of the time-inconsistency problem. B) Policymakers are tempted to deviate from the preannounced policy once the public changes its expectations. C) Feedback rules are preferred to discretionary rules. D) Disinflation will be painless if the restrictive policies announced by the government are credible.
Markets may fail to allocate resources efficiently when property rights are not well established
a. True b. False Indicate whether the statement is true or false