Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the quantity of real loanable funds per time period and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. There is not enough information to determine what happens to these two macroeconomic variables.
b. The GDP Price Index rises, and nominal value of the domestic currency rises.
c. The GDP Price Index falls, and nominal value of the domestic currency rises.
d. The GDP Price Index rises, and nominal value of the domestic currency remains the same.
e. The GDP Price Index rises, and nominal value of the domestic currency falls.
.E
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Describe appropriate discretionary fiscal policy according to Keynesian economics to smooth out the business cycle.
What will be an ideal response?
A U.S. company is attempting to cut costs by shifting some of its services to Thailand. This process of shifting production of products or services overseas to cut costs often results in:
A. greater potential for market failure for those products and services. B. greater economic uncertainty in the market for those products and services. C. lower consumer prices on those products or services. D. lower production quantities of those products or services.