Assume that the central bank sells government securities in the open market. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real GDP and net nonreserve-related borrowing/lending in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium
a. Real GDP remains the same and net nonreserve-related borrowing/lending balance becomes more positive (or less negative).
b. Real GDP rises and net nonreserve-related borrowing/lending balance becomes more negative (or less positive).
c. Real GDP falls and net nonreserve-related borrowing/lending balance becomes more positive (or less negative).
d. Real GDP and net nonreserve-related borrowing/lending balance remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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