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 current international transactions balance and monetary base in the context of the Three-Sector-Model?
a. The current international transactions balance rises and monetary base rises.
b. The current international transactions balance falls and monetary base falls.
c. The current international transactions balance falls and monetary base rises.
d. The current international transactions balance and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 2 - If expected future incomes fall, this causes the nation's current:
a. Aggregate demand to fall, the average price level to fall, and real GDP to rise.
b. Aggregate supply to rise, the average price level to rise, and real GDP to rise.
c. Aggregate demand to rise, the average price level to rise, and real GDP to rise.
d. Aggregate supply to fall, the average price level to rise, and real GDP to fall.
e. Aggregate demand to fall, the average price level to fall, and real GDP to fall.
Question 3 - 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 real exchange rate and monetary base in the context of the Three-Sector-Model? Assume the nominal exchange rate is stated as: (Foreign currency per Domestic currency).
a. The real exchange rate rises and monetary base falls.
b. The real exchange rate and monetary base fall.
c. The real exchange rate and monetary base remain the same.
d. The real exchange rate falls and monetary base rises
e. There is not enough information to determine what happens to these two macroeconomic variables.
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