A $1.5 trillion increase in investment leads equilibrium expenditure to increase from $7.0 trillion to $10.5 trillion. In this case, the expenditure multiplier is
A) 7.00. B) 4.67. C) 2.33. D) 1.50. E) 10.5.
C
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Assume that the central bank increases the reserve requirement. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and current international transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and current international transactions become more negative (or less positive). b. The real risk-free interest rate rises, and current international transactions become more negative (or less positive). c. The real risk-free interest rate and current international transactions remain the same. d. The real risk-free interest rate rises, and current international transactions remains the same. e. There is not enough information to determine what happens to these two macroeconomic variables.