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 real exchange rate and monetary base in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium. Assume the nominal exchange rate is stated as: (Domestic currency per foreign currency).
a. The real exchange rate rises and monetary base rises.
b. The real exchange rate rises and monetary base falls.
c. The real exchange rate and monetary base fall.
d. The real exchange rate and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 2 - The Institutional Possibilities Frontier measures:
a. productive potential
b. the production possibilities frontier
c. the tradeoff between private order and dictatorial disorder
d. the dictator's opportunity costs
e. the tradeoff between private markets and dictatorial orders.
Question 3 - If the price of inputs rises and personal income taxes rise:
a. Aggregate demand falls and aggregate supply rises.
b. Aggregate demand rises and aggregate supply rises.
c. Aggregate demand falls and aggregate supply falls.
d. Neither the aggregate demand nor the aggregate supply change.
e. None of the above.
Question 4 - 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 reserve-related (central bank) transactions and monetary base in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium.
a. The reserve-related (central bank) transactions become more positive (or less negative) and monetary base rises.
b. The reserve-related (central bank) transactions become more negative (or less positive) and monetary base falls.
c. The reserve-related (central bank) transactions become more positive (or less negative) and monetary base remains the same.
d. The reserve-related (central bank) transactions and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 5 - Which of the following countries has had the more successful transition?
a. Poland
b. Russia
c. Kazakstan
d. Georgia
e. Kyrgystan
Question 6 - If the price of inputs rises and personal income taxes rise:
a. Aggregate demand rises, but aggregate supply does not change.
b. Aggregate demand falls and aggregate supply rises.
c. Aggregate demand rises and aggregate supply rises.
d. Aggregate demand falls and aggregate supply falls.
e. Neither the aggregate demand nor the aggregate supply change.
Question 7 - 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 GDP Price Index and the nominal value of the domestic currency in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium.
a. The GDP Price Index rises and nominal value of the domestic currency remains the same.
b. The GDP Price Index falls and nominal value of the domestic currency remains the same.
c. The GDP Price Index and nominal value of the domestic currency remain the same.
d. The GDP Price Index rises and nominal value of the domestic currency rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
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