Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the quantity of real loanable funds per time period and the monetary base in the context of the Three-Sector-Model?
a. The quantity of real loanable funds rises and monetary base rises.
b. The quantity of real loanable funds falls and monetary base rises.
c. The quantity of real loanable funds falls and monetary base falls.
d. The quantity of real loanable funds and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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Refer to the scenario above. Which investment option will a risk-averse individual choose?
A) He will choose to invest in Option A. B) He will choose to invest in Option B. C) He will choose to invest in Option C. D) He will be indifferent in investing in any of the three options.
If full-employment GDP is equal to $4.2 trillion, what does the long-run aggregate supply curve look like?
A) It is a vertical line at a level of GDP above $4.2 trillion. B) It is a vertical line at $4.2 trillion of GDP. C) It is a horizontal line at $4.2 trillion of GDP. D) It is a vertical line at a level of GDP below $4.2 trillion.