Assume that business investment spending rises, and the increase is funded by greater borrowing in the capital markets. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the net nonreserve international borrowing/lending balance and monetary base in the context of the Three-Sector-Model?
a. The net nonreserve international
borrowing/lending balance becomes more positive (or less negative) and monetary base rises.
b. The net nonreserve international borrowing/lending balance becomes more negative (or less positive) and monetary base falls.
c. The net nonreserve international borrowing/lending balance becomes more negative (or less positive) and monetary base falls.
d. The net nonreserve international borrowing/lending balance 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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a. True b. False Indicate whether the statement is true or false