Assume that the central bank increases the reserve requirement. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?
a. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
b. The GDP Price Index rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
c. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).
d. The GDP Price Index and net nonreserve-related international borrowing/lending remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.C
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Sandy's uncompensated demand for candy is given by the equation Q = 15/p, where Q is the quantity of candy and p is the price. When the price of candy rises from $1 to $3, the change in consumer surplus is
A) $16.5. B) -$20. C) -$15. D) $15.
Refer to the graphs and information below. If Italy and Greece should open up trade with each other, which of the following terms of trade is mutually beneficial?
Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves for the two countries are shown in the graphs below.
A. 1 ton of chemicals = 1 ton of steel
B. 2 tons of chemicals = 1 ton of steel
C. 5 tons of chemicals = 2 tons of steel
D. 9 tons of chemicals = 5 tons of steel