Assume that the central bank lowers the discount to increase the nation's monetary base. 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? State your answer after the macroeconomic system returns to complete equilibrium.
a. The real
risk-free interest rate falls and GDP Price Index falls.
b. The real risk-free interest rate rises and GDP Price Index falls.
c. The real risk-free interest rate and GDP Price Index remain the same.
d. The real risk-free interest rate falls and GDP Price Index rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.C
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Suppose that Mr. Chopp withdraws $500 from his checking account. If the reserve requirement is 5 percent, what will be the maximum potential change in the money supply forthcoming from Mr. Chopp's transaction?
a. $10,000 b. $500 c. $0 d. -$500 e. -$10,000
In 1975 a pocket calculator cost more than $50; in 1990 a calculator of the same quality cost less than $10 . Which of the following explanations is most consistent with these facts? a. Intense competition in the calculator industry caused the supply curve for calculators to shift to the left, depressing the price. b. An increase in the demand for calculators led to the price drop
c. An improvement in technology caused the supply of calculators to increase, depressing their price. d. As the population grew, fewer expensive calculators were needed, causing prices to fall.