Assume that the central bank purchases government securities in the open market. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and real GDP in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and real GDP rises.
b. The real risk-free interest rate rises, and real GDP remains the same.
c. The real risk-free interest rate falls, and real GDP remains the same.
d. The real risk-free interest rate and real GDP remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
You might also like to view...
The supply and demand for money intersect at the equilibrium real interest rate, while the supply and demand curves for loanable funds intersect at the equilibrium real interest rate
a. True b. False Indicate whether the statement is true or false
Assume fixed costs are 470 and labor costs $20 per unit. The first laborer produces 20 units of output. Subsequent hires add 5 units less to production than the previous worker. Thus the second worker adds 15, the third adds 10 etc. If the fifth laborer adds 25 units to the short run production output and the sixth laborer adds 20 units to the total output and the firm can hire all the labor it wants at the going wage we can be sure that
A. average variable cost is increasing. B. marginal cost is increasing. C. average total cost is increasing. D. None of these is correct because all the costs listed are decreasing.