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 GDP Price Index and monetary base in the context of the Three-Sector-Model?
a. The GDP Price Index rises and monetary base rises
b. The GDP Price Index rises and monetary base falls.
c. The GDP Price Index and monetary base fall.
d. The GDP Price Index and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
Economics
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