Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and reserve-related (central bank) transactions remain the same.
b. The real risk-free interest rate rises, and reserve-related (central bank) transactions remain the same.
c. There is not enough information to determine what happens to these two macroeconomic variables.
d. The real risk-free interest rate falls, and reserve-related (central bank) transactions become more negative (or less positive).
e. The real risk-free interest rate falls, and reserve-related (central bank) transactions become more positive (or less negative).
.A
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Any increase in the present value of taxes for the consumer implies
A) an increase in lifetime wealth and an increase in current labor supply. B) an increase in lifetime wealth and a decrease in current labor supply. C) a decrease in lifetime wealth and an increase in current labor supply. D) a decrease in lifetime wealth and a decrease in current labor supply.
In year 1 the average price of X is $10, and in year 2 the average price of X is $23. If consumers buy more units of X in year 2 than in year 1, it follows that
A) the law of supply does not hold for good X. B) demand for good X could be higher in year 2 than in year 1. C) supply of good X could be less in year 2 than in year 1. D) good X buyers have received an increase in income between year 1 and year 2, and good X is a normal good. E) b and d