Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and real GDP in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises and real GDP rises.
b. The real risk-free interest rate falls, and real GDP rises.
c. The real risk-free interest rate rises, and real GDP falls.
d. The real risk-free interest rate and real GDP remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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During 1990–2003, as a percentage of total resource flows to developing countries, the share of official flows has
(a) remained relatively constant. (b) increased by a relatively small percentage. (c) increased by a relatively large percentage. (d) decreased by a relatively small percentage. (e) decreased by a relatively large percentage.
Compared to a nonpoor individual, a poor individual is more likely to be
a. female. b. black. c. a child. d. All of the above are correct.