Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and current international transactions in the context of the Three-Sector-Model?
a. The GDP Price Index falls, and current international transactions become more negative (or less positive).
b. The GDP Price Index and current international transactions remain the same.
c. The GDP Price Index rises, and current international transactions remain the same.
d. There is not enough information to determine what happens to these two macroeconomic variables.
e. The GDP Price Index rises, and current international transactions become more positive (or less negative).
.E
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Suppose that a new customer opens a checking account and a saving account, placing $50,000 in each. Later, the bank makes a loan of $100,000 to a business firm. For this bank
A) assets increased by $100,000 because the loan is an asset, and liabilities increased by $100,000 because the checking and saving accounts are liabilities. B) assets increased by $100,000 because the checking and saving accounts are assets, and liabilities increased by $100,000 because the loan is a liability. C) assets increased by $50,000 because the saving account is an asset, while liabilities increased by $50,000 because the checking account is a liability. D) assets remained unchanged but liabilities increased by $100,000 because of the loan.
A monopoly incurs a marginal cost of $1 for each unit produced. If the price elasticity of demand equals -2.0, the monopoly maximizes profit by charging a price of
A) $1.00. B) $1.50. C) $2.00. D) $3.00.