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 reserves account and monetary base in the context of the Three-Sector-Model?
a. The reserves account becomes more positive (or less negative) and monetary base
falls.
b. The reserves account becomes more negative (or less positive) and monetary base rises.
c. The reserves account and monetary base remain the same.
d. The reserves account becomes more negative (or less positive) and monetary base remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
You might also like to view...
Keynes's liquidity preference theory of the interest rate suggests that the interest rate is determined by
A. the supply and demand for labor. B. aggregate supply and aggregate demand. C. the supply and demand for loanable funds. D. the supply and demand for money.
A firm should continue producing until
A) the cost of producing the output equals the revenues obtainable from selling the output. B) the cost of increasing output by one more unit equals the revenues obtainable from selling the extra unit. C) average costs are at a minimum. D) the average cost when another unit is produced equals the average revenue obtainable from selling the extra unit.