Assume that foreign capital flows into a nation rise due to expected increases in stock market appreciation. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls and GDP Price Index rises
b. The real risk-free interest rate falls and GDP Price Index falls.
c. The real risk-free interest rate rises and GDP Price Index falls.
d. The real risk-free interest rate and GDP Price Index remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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If Eastland's consumer confidence rises, what would happen to macroeconomic equilibrium in the short-run if the short-run aggregate supply curve is upward sloping?
A) AD shifts right, aggregate output increases, and prices fall. B) AD shifts right, aggregate output increases, and prices rise. C) AD shifts left, aggregate output decreases, and prices fall. D) AD shifts left, aggregate output decreases, and prices rise.
The negative supply shock of 2007, compared to the shocks in 1973 & 1979, involved ________
A) a larger decrease in aggregate demand B) larger decreases in the real interest rate C) smaller decreases in aggregate supply D) larger increases in the real interest rate