Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to real GDP and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. Real GDP rises, and nominal value of the domestic currency falls.
b. Real GDP rises, and nominal value of the domestic currency rises.
c. Real GDP falls, and nominal value of the domestic currency remains the same.
d. Real GDP falls, and nominal value of the domestic currency falls.
e. Real GDP falls, and nominal value of the domestic currency rises.
.D
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As relative prices in various industries change due to trade, the marginal product of the mobile resources used in the expanding industry __________, and the marginal product of the mobile resources used in the contracting industry __________.
a. rises; falls b. falls; rises c. remains the same; remains the same d. changes by exactly the same percentage; changes by exactly the same percentage
Using the supply and demand curve for wheat above, sketch the supply and demand curves demonstrating the effect of an increase in disposable consumer incomes
How does each curve shift (if at all) to the increase in income? What does the shift do to equilibrium price and quantity?