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 low mobility 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 falls, and real GDP rises.
b. The real risk-free interest rate rises, and real GDP remains the same.
c. The real risk-free interest rate and real GDP remain the same.
d. The real risk-free interest rate falls, and real GDP falls.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 2 - The purchase of a virtual item from an online company with a virtual currency causes the nation's:
a. Monetary base to rise.
b. M2 money supply to fall.
c. M2 money multiplier to fall.
d. Monetary base to remain the same.
Question 3 - Leverage refers to:
a. an IPO
b. Secondary offering
c. the ratio of debt to equity
d. The derivatives market
e. All of the above
Question 4 - 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 low mobility international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and GDP Price Index falls.
b. The real risk-free interest rate rises, and GDP Price Index falls.
c. The real risk-free interest rate and GDP Price Index remain the same.
d. The real risk-free interest rate falls, and GDP Price Index remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
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