Assume that the central bank increases the reserve requirement. 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 current international transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and current international transactions become more negative (or less positive).
b. There is not enough information to determine what happens to these two macroeconomic variables.
c. The real risk-free interest rate rises, and current international transactions become more positive (or less negative).
d. The real risk-free interest rate and current international transactions remain the same.
e. The real risk-free interest rate falls, and current international transactions become more negative (or less positive).
.A
You might also like to view...
All else constant, a decrease in the supply of money will lead to
A) an increase in the equilibrium quantity of money and an increase in the equilibrium price of bonds. B) an increase in the equilibrium quantity of money and a decrease in the equilibrium price of bonds. C) a decrease in the equilibrium quantity of money and an increase in the equilibrium price of bonds. D) a decrease in the equilibrium quantity of money and a decrease in the equilibrium price of bonds
Suppose the U.S. dollar price of the Japanese yen decreases. Given this information, which of the following is correct?
A) The dollar has appreciated. B) The dollar has depreciated. C) The yen has appreciated. D) The yen price of the dollar decreased.