Assume that the central bank lowers the discount to increase the nation's monetary base. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the quantity of real loanable funds per time period and GDP Price Index in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium.
a. The quantity of real loanable funds per time period rises and GDP Price Index rises.
b. The quantity of real loanable funds per time period falls and GDP Price Index falls.
c. The quantity of real loanable funds per time period rises and GDP Price Index falls.
d. The quantity of real loanable funds per time period and GDP Price Index remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 2 - If a nation experiences weather disasters, such as tsunamis and droughts, then its:
a. Average price level and real GDP should remain constant until there is a change in Aggregate Demand.
b. Average price level and real GDP should fall.
c. Average price level and real GDP should rise.
d. Average price level should fall, and real GDP should rise.
e. Average price level should rise, and real GDP should fall.
Quick Reply
