Assume that the central bank increases the reserve requirement. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The GDP Price Index falls, and reserve-related (central bank) transactions become more negative (or less positive).
b. The GDP Price Index rises, and reserve-related (central bank) transactions remain the same.
c. There is not enough information to determine what happens to these two macroeconomic variables.
d. The GDP Price Index falls, and reserve-related (central bank) transactions remain the same.
e. The GDP Price Index and reserve-related (central bank) transactions remain the same.
.D
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